Kerry Subcommittee Report: Drugs, Law Enforcement And Foreign Policy

100th Congress
2d Session

COMMITTEE PRINT

S. Prt.
100-165

DRUGS, LAW ENFORCEMENT AND FOREIGN POLICY

A REPORT

PREPARED BY THE

SUBCOMMITTEE ON
TEKKORJSM, NARCOTICS AND INTERS
• OPERATIONS

OF THE . . . ) ;

COMMIT

TEE ON FOREIGN REI

iATFONS

II

r .

i

NJTED STATES SENATE

DECEMBER 1988

e

Printed for the use of the Committee on Foreign Relations

96-845

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1989

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, DC 20402

COMMITTEE ON FOREIGN RELATIONS

CLAIBORNE PELL; Rhode Island, Chairman

JOSEPH R. BIDEN, Ja., Delaware " ' JESSE HELMS, North Carolina
PAUL §. SARBANES, Maryland ' RICHARD G, LUGAR, Indiana

ALAN CRANSTON, California NANCY L. KASSEBAUM, Kansas

CHRISTOPHER J. DODD, .Connecticut /RUDY BOSCHWTTZ, Minnesota

'JOHN F. KERRY, Massachusetts LARRY PRESSLER, South Dakota

PAUL SIMON, Illinois FRANK H. MURKOWSKI, Alaska

TERRY SANFORD, North Carolina . PAUL S. TREBLE, Jr., Virginia

BROCK ADAMS, Washington ■ DANIEL J, EVANS, Washington

DANIEL P. MOYNIHAN, New York ' . MITCH McCONNELL, Kentucky

Geeyld B. Chbistianson; Staff Director
James P/- Lucieb, Minority Staff Director

Subcommittee on Tehboeism, Narcotics and International Operations

JOHN F. KERRY, Massachusetts, Chairman
BROCK ADAMS, Washington MITCH McCONNELL, Kentucky

DANIEL P.. MOYNIHAN, New York FRANK H. MURKOWSKI, Alaska

LETTER OF TRANSMITTAL

U.S. Senate,
Committee on Foreign Relations,

Washington, DC, April IS, 1989.

Hon. Claiborne Pell,

Chairman, Committee on Foreign Relations,

U.S. Senate, Washington, DC,

Dear Mr. Chairman: Two years'Sago, you directed the Subcom-
mittee on Narcotics, Terrorism and International Operations to
conduct an investigation regarding the links between foreign
policy, narcotics and law enforcement in connection with drug traf-
ficking from the Caribbean and Central and South America to the
United States. This Report is the final written product of that in-
vestigation in the 100th Congress.

Pursuant to your direction, the Subcommittee conducted four-
teen days of open hearings, nine executive sessions, and received
testimony from 27 witnesses. In addition, the staff deposed an addi-
tional 20 witnesses. Thirty subpoenas were issued, many calling for
the production of extensive documentation.

The Subcommittee's investigations resulted in a wide-ranging
review of past policies and practices in handling foreign policy and
the war on drugs. It is our privilege to transmit the report contain-
ing findings and conclusions based on the investigation, a country-
by-country analysis of the drug problem as it has affected U.S. for-
eign policy in Latin America, a review of drug links to the Contra
movement and the Nicaraguan war, of money laundering, and of
issues involving conflicts between law enforcement and national se-
curity. Appendices to the report detail allegations of how the Com-
mittee's initial investigation in 1986 may have been interfered
with.

We very much appreciate the support and assistance you have
given us throughout the course of this investigation. I would like to
note our personal appreciation for the efforts of the personnel who
handled this investigation: Special Counsel Jack A. Blum, Kathleen
Smith, and Jonathan Litchman of the Committee Staff; and Rich-
ard McCall, Jonathan Winer, and David McKean of Senator
Kerry's personal staff, along with Senator Kerry's former adminis-
trative assistant, Ron Rosenblith. This report would not have been
possible without their dedicated work.

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rv

X^TT*^ beh€ T S that this ^estigation has demon-
strated that the drug cartels pose a continuing threat to national

SpT* 7 ^ °T n* d a J ,I °? 4 ^ ^ at the U * ited Stat ^ has too
often m the past allowed other foreign policy objectives to interfere
witti the war on drugs. The Subcommittee hopes that this Report
wlU [ contribute to better understand by the Congress of this
problem, and to constructive legislative proposals which may allow
us to avoid repeating the mistakes of the past.
Sincerely yours,

John Kerry, Chairman.
Brock Adams.
Daniel P. Moynihan.

CONTENTS

Page

Letter of Transmittal ; m

1. Executive Summary and Conclusions 1

Past Failures 2

Policy and Priorities 3

Administrative Recommendations - 3

Specific Legislative Recommendations 4

2. INTRODUCTION 5

Origins and Methodology 5

The Scope of the Threat.,-. 7

Domestic Effects of International Drug Trafficking 8

Effects on Foreign Countries 9

The National Security Implications of the Drug Trade 10

Synopsis of the Report 12

Open Issues and Subjects Requiring Further Investigation 12

3. The Bahamas „ 14

Introduction : 14

Growth of Official Corruption with Vesco and Bannister - 15

Use of Norman's Cay For Smuggling 16

Response by U.S. to Lehder Problem - 17

Extent of Bahamian Corruption Today 19

Bahamas Seeks To Influence U.S. Policymakers 20

Bahamian "Cooperation" ; 21

Conclusions 21

Appendix: State Declassified Material.. 23

4. Colombia : 25

Introduction .-, 25

Origins of Narcotics Trafficking in Colombia 26

Origin of the Cartels 27

Organization and Wealth 28

The Cartel's War Against the Colombian Government. 30

Adequacy of Legal and Law Enforcement Measures 30

Conclusions ':. 33

5. Narcotics Traffickers and the Contras...„ 36

. Introduction .. 36

Executive Branch Response to Contra Drug Allegations 37

The Guns and Drug Smuggling Infrastructure Develops 39

Drug Trafficking and the Covert War — --. 41

The Pilots ;. 42

U.S. Government Funds and Companies with Drug Connections 42

A. SETCO/HONDU CARD3 44

B. FRIGORIFieOS DE PUNTERENNAS .-. 45

C. DIACSA - 47

D. VORTEX ; 48

The case' of George Morales and FRS/ARDE 1 49

John Hull , 53

San Francisco' Frogman Case, UDN-FARN and PCNE 58

The Cuban-American Connection ; 59

Ramon-Milian Rodriguez and Felix Rodriguez 61

Cv)

VI

■ Page

6. Cuba and Nicaragua ~g2

Introduction _ go

Historical Background !!.!!!!!! 63

Cuba As a Way-Station for Smugglers !!!!!!!™!!!!!!!!!!!!!!!!!!! 63

Case History: George Morales 64

Ideological Use of Drugs gg

Cuba, Panama and the Cartel "I!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 66

Castro Denies Involvement *"'!. gg

Allegations Concerning Nicaragua ; !!!!!!!!!!!!!!!!!!!!!!!!!!!!! *" 67

Summary and Conclusions , gg

7 - H^ 11 • 69

Introduction gg

The Colombians Move In !..!!!!!!!!!!!!!!!!! 70

The Miami Connection !!!!!!!!!!!!!!! 71

DEA's Operations in Miami and in Haiti !.!!! ' 72

Conclusions * " Y2

8. Honduras yg

Introduction

History of Narcotics Trafficking in Honduras.!!';^™™!"™™^!!*!!!™!!*."!"' 73

Bueso-Eosa, Latchiniah and Narco-Terrorism 76

Ramon Matta Ballestero's „ " 77

Eigoberto Regalado Lara :„...". !!!!!!!!!!!!!!! 78

Policy Issues ; !!!!!!!!!!!!!!!!!!! ' 78

9. Panama ^

Introduction 79

Origins of Corruption in Money Lamtdexii^ZZZZZZZZZZZ 80

Early Panamanian Involvement in Narcotics 82

Noriega s Corruption of Panamanian Institutions • •»——-- ^

Noriega s Involvement in the Arms Business ' "' 84

Noriega and the Cartel.. - " oc

Noriega's Rift with the Cartel ' f " 86

Noriega's U.S. Partners ZZZZZZ.""" r 87

U.S. Knowledge of Noriega's Activities..!.™:"!!!!'!!!"!!! ' 88

Why Did the U.S. Fail To Respond to Noriega Allegations?. ' 91

Mixed Messages „„, 94

Conclusion.. ...!!!!!!!!!!!!!!!!!!!!! 97

Appendix: GAD-NSC Correspondence!!!!!!!!!!!!!!!!!!!!!!.!!!!!!!!!!!!!!!!!!!!!!!!!! 97

10. Money _ ; ^

Introduction. , „ ..... '!'.....,„..„.„:„„ 112

Defining the Problem 9f Money Lauhdering ...!...;...!,!!!!!!!!!!!!!!!!!!!!!!! 112

The Bank Secrecy Act 'Restricts Money Laundering.........'. !.!!.!!. 113

The International Loophole ■ ■ " 113

Case Histories Z'ZZ. 114

Cayman Islands : !.!!!!!!!!!!!..!.!!!!!!!.!!!!!!!!;!!! " 114"

Bahamas _ !!!!!!!!!!!!!!!!!!!!!!!!"' 115

Panama „ ■..„„.. ..J!!!!!!!!!!"!!!.! ' " 115

One Money Launderer's E^erience........;;..;..!!!!!!!!!!!!!!!!!!!'!!!!!!!!!!!!!!! 117

U.S. Response to the Problem ; !!!!!!!!!!!!!!!!!!!!!!!! 118

Effectiveness of Current Reporting Requirements !!!!!!!!!!!!!!!!!!!!!!!! 119

Summary and. Conclusions...^. . „„... !!!;!!!!!" 120

11. Law Enforcement vs. National Security: Confused Priorities 120

Introduction ipn

Barry Seal and the Cartel !!!!!!!!!!!!!!!!! " 121

Bueso-Rosa and the Contras !.! !.!!!!!!!!!!!!!!!!!!"" 121

Intelligence vs. Law Enforcement. ... ' " 122

Misguided Priorities : v 12 3

Consequences of Privatizing U.S. Foreign PoTicy'!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!'!!!!! 124

vn

Page

Case Studies 126

Michael Palmer „ 126

Frank Camper , 128

Richard Brennecke ; 130

Conclusion 132

12. Conclusions „ 133

National Security Issues 133

Federal Priorities 135

Covert Activity Issues .-. 136

Law Enforcement Issues 137

Money Laundering Issues 142

Personnel Issues 143

Neutrality Act..;. 144

APPENDIXES

A. Narcotics and the North Notebooks 145

Summary „ 145

Committee Action 146

Selected Drug Related Entries 146

B. Allegations' op Interference With The Committee Investigation 147

Allegations of Interference .". 147

Chronology 150

C. Witness List : , 167

Witnesses ; 167

Writs „ 169

Subpoenas i 169

Depositions .'. 169

Appendix

The Exhibits consist of documents referred to in footnotes.

ABA Report, 1988, "Criminal Justice in Crisis" - 171

State Department International Narcotics Control Strategy Eeport (LNCSE),

March 1988, Paraguay., 172

State Department LNCSR, 1989, Mexico 174

London Sunday Times Magazine, September 29, 1985: Paradise Lost ; 175

State Department LNCSR, 1988, Bahamas.... ; 199

NBC Nightly News, April 30, 1987 „ 200

State Department LNCSR, 1988, Bahamas 204

State Department INCSR, 1989, Bahamas ■. 205

Black, Manafort and Stone, Proposal for the Government of the Bahamas 206

Bruce Bagley, "Colombia and the War on Drugs," Foreign Affairs .^.„ 226

State Department INCSR, 1987, Colombia.- 249

The Miami Herald, November 29, 1987, "The Medellin Cartel" 252

The Miami Herald, December 2, 1987, "Little Man Led to Big Drug Bust" 256

The Miami Herald, December 3, 1987, "Cartel's Killers Stalked Heroic Cop

For a Year" 259

State Department INCSR, 1988, Colombia 262

State Dept. Doc. No. 3079c "Allegations of Misconduct of the Nicaraguan

Resistance,* March, 1986...... 263

State Dept. Doc. No. 5136c "Allegations of Drug Trafficking and the Nicara-
guan Democratic Resistance," July 26, 1986 : 266

North Notebooks, "Pastora Revealed as Drug Dealer" 271

Memo, Robert Owen to Oliver North, April 1, 1985 272

Letter, Eden Pastora to Elliot Abrams and David Sullivan, April 10, 1986 275

Customs Report, Guy Penilton Owen, May 9, 1983 _ 278

Shippers Export Declaration, R/M Equipment, Inc., for Hondu Carib Cargo to

Armed Forces of Honduras February 28, 1985 296

Notebook found aboard Hondu Carib plane, "Rob Owens".... — 297

Statements, Carlos Soto, in re: .Luis Rodriguez, April 3, 1987 298

State ments, Carlos Soto, in re: Luis Rodriguez, May 8, 1987 303

vm

Statements, Carlos Soto, in re: Luis Rodriguez, June 17, 1987 307
Tl9S? GPt ' ° f Enforcement Investigative Report, EugerioGarciaTAprii

Testimony of Carlos S(^~8^i^^'^19&TZZ7"~ 310

Indictment, US. v. Floyd Carlton-Caceres et al ' oTo

Affidavit of DEA Agent Moritz, U.S. v. Carlton ' ogf

U.S. v. Caballero Motion for Permission to Travel '" qrt

Indictment, U.S. v. Luis Rodriguez .... ' q«5

Frigorificos Account, NHAO, GAO Summary ' qra

NHAO Signature Cards, Frigorificos de Punterennas... ""

NHAO Records, Frigorificos . , ibb

Ocean Hunter, Inc. corporate records " """ orb

Mi-. Shrimp; NCP Trading Florida corp. records"."!"." """ ' """ X

Aquarius Seafood, Florida corp. records. 370

FBI Investigative Report of George Kiszynski, rrom"rJC"Dia^"reCon'^ental

tssms. combing - . o 7 -,

L 1s a i^9 n John C ' Lawn t0 Senatoi " ^^'^"i£^^T^^^'jmua^

North notebook entries re "John Hull" " ooo
Newsweek, "The CIA Blows An Asset".... "-" " """" ™*
San Franciseo Examiner, letter to the Editor from U.s7'Attorney" Joseph

rtussoniello , J c nqa

Teletype to FBI Director re ZavaWCab^ZZ777 Sn

CBS Evening News, June 12, 1986 " -" ' '" . |V q

State Department documents, NHAO, back up documente"to"Frigoriricos"de

^Pirnterennas notarized by "Francisco Aviles Saenz".... - 411
™ 302 s of George lOszynski, including statements of Rafael Tores Jimenez

, Rene Corvo, Joseph Marcos, Francisco Hernandez . 41 q

San^i^s^Examiner, "Big Bay Area Cocaine Ring "tied "to Contoas""

■Letter from Jolm" Bolton to Senator" cTafrorn^P^Ua^^ 482

Lugar; August 11, 1986 A oa

All Things Considered, May 5, 1986......'. "" " ' ' 43?

Shippers Export Declaration, Florida Air Leasing Corp7'Mlrch 671985 "for

™ ^j^al supphes" for "Salvadoran Refugees" 442

Monda Aircraft Leasing Corp, Invoice to "American Flyers," for Fort Lauder-

dale-San Salvador-Fort Lauderdale 443

Florida Aircraft. Leasing. Declaration, March"*, 1985!.... . J .

Busmess Cards Moises Nunez, Frank Chanel from FBI InVestigative : "Fiies >

released in U.S. v. Corbo _ .„„ . ? " . 44g

SS'SE? Report, mteryiew with Bamon l^^'^loS^^'^Xl^Z~.} 447

frJl interview with Frank Castro: .- . :

August 10, 1987 „ . mco

. August 20, 1987 "" : : f.*"'' """"" - : ^a

- March 8, 1985 „ ; ZZZZZZZZZ ZZ ■ V""";"^" ; . *g

Customs 1 Report, interview with Ramon Mman"RodrigueI'May T 1983""""""" 462
Redacted copy of DEA interview of "Miami Attorney' "" 470
State Department INCSR, 1988: ' -

Cuba „ _ , u Uf »

Haiti .,..„;;;. . ; 4tg

Honduras... ; „ ' ' V """ 404

New York Times, ^Military Officers" m "'Honauras" LnikedTo' Drug"Tr'ade7 : ■

February 12, 1988, James LeMoyne e * ' 407

Washmgton Post, December 7, 1987, "U.S. Looks at Ho^du^'as''6r^"Sa^

ter Jromt ;;™„ :.„■. ...;•„......,; \ . • -489

Memorandum from Jose Blandon to Subcommittee,' February : T988"" V "' " 492
Panama A Haven For Traffickers, Knut Royce, June 1985 "". -lit

n SaSSS^S t t^''' 1985> " panamk -"-^ «!»>» .EnS-si

NBC Nightly News, February 22, 1989... .-- -«• , «?

Reuters, Pebruary-25, 1987, re.\Bueso-Rosa..<. h '" Sit
A Geo ? rfe r Sa 25 ' ^ <<Norfh .. ^ ™ Defending"'Convicted"Ho^^

DC

Page

AP, April 14, 1987, "North Got FBI Report on Contra-Supply Probe, Officials

Say'' 517

Report, Pegasus/Camper, December 12, 1984 519

MemCom, Jeffrey Feldman, November 18, 1987, Internal Security Section,

Criminal Division, Justice Department 527

Christian Science Monitor, "Justice Officials Find No Crime Link to Contra

Leaders," May 6, 1986, Warren Richey 530

U.S. Department of Justice, Memo from Ken Bergquist to Steve Trott, re

Upco min g "Contra" Hearings in the Senate Foreign Relations Committee,

May 13, 1986 531

Attendees at May 6, 1986 Meeting between Foreign Relations Committee and

government agencies '. 533

Messick MemCom, May 6, 1986 meeting 535

Deposition of. Leon B. Kellner, Esq., November 8, 1989 ; 540

Narcotics Investigation, October 5, 1988 (with attachments) 608

Drugs, Law Enforcement and Foreign Policy, Central America, September 28,

1987 (with attachments) 889

Deposition of Thomas E. Marum, October 25, 1988 : 991

Deposition of Mark N. Richard, November 7, 1988 1067

EXECUTIVE SUMMARY AND CONCLUSIONS

"The American people must understand much better than they ever have
in the past how (our) safety and that of our children is threatened by Latin
drug conspiracies (which are) dramatically more successful at subversion in
the United States than any that are centered in Moscow." 1

That warning was delivered in Subcommittee testimony by Gen-
eral Paul C. Gorman, now retired and formerly head of U.S. South-
ern Command in Panama. Such a characterization, coming from an
individual who served with such distinction in the United States
Army, should not be taken lightly.

There should not be any doubt in anyone's mind that the United
States is engaged in a war directed at our citizens— the old, the
young, the rich, the poor. Each day, with what has become a numb-
ing regularity, the American people are besieged with the news of
the latest casualties in the drug war.

The Colombian drug cartels which control the cocaine industry
constitute an unprecedented threat, in a non-traditional sense, to
the national security of the United States. Well-armed and operat-
ing from secure foreign havens, the cartels are responsible for
thousands of murders and drug-related deaths in the United States
each year. They exact enormous costs in terms of violence, lower
economic productivity, and misery across the nation.

The American criminal justice system has been overwhelmed by
the drug war. To date, most of the U.S. law enforcement efforts
have been directed at the domestic drug distribution network. The
result is a criminal justice system swamped with cases which
cannot be processed fast enough, jails that are overflowing with
prisoners, a greater influx of cocaine than when the war on drugs
was declared in_1983, and a cheaper, higher quality product.

As a recent study sponsored by the Criminal Justice Section of
the American Bar Association noted:

A major problem reported by all criminal justice partici-
pants is the inability of the criminal justice system to con-
trol the drug problem . . . through the enforcement of the
criminal law. Police, prosecutors and judges told the Com-
mittee that they have been unsuccessful in making a sig-
nificant impact on the importation, sale and use of illegal
drugs, despite devoting much of their resources to the
arrest, prosecution and trial of drug offenders. 2

Attempts to interdict the flow of drugs at the border, while im-
portant, has experienced only marginal success. According to U.S.
officials in the vanguard of the war on drugs, at best, interdiction

1 Subcommittee testimony of General Paul Gorman, Part 2, February 8, 1988, p. 27.

s Criminal Justice in Crisis, A Report to the American People and the American Bar on Crimi-
nal Justice in the United States, American 1 Bar Association, Criminal Justice Section, Washing-
ton, DC, November 1988, P- 5.

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2

results in the seizures of only 15 percent of the illegal narcotics
coming into the country. For the drug cartels, whose production ca-
pabilities stagger the imagination, a 15 percent loss rate is more
than acceptable.

Demand reduction through education and rehabilitation are criti-
cal elements in the war on drugs. But most experts acknowledge
that even this strategy will require a considerable period of time
before major inroads are made into significantly reducing cocaine
usage in this country. . . .

The narcotics problem is a national security and foreign policy
issue of significant proportions. The drug cartels are so large and
powerful that they have undermined some governments and taken
over others in : our hemisphere. They work with revolutionaries and
terrorists>They have demonstrated the power to corrupt military
and civilian institutions alike. Their objectives seriously jeopardize
U.S. foreign policy interests and objectives throughout Latin Amer-
ica and the Caribbean.

The Subcommittee investigation has led to the following conclu-
sions and recommendations.

Past Failures

— In the past, the United States government has either failed to
acknowledge, or underestimated, the seriousness of the emerg-
ing threat to national security posed by the drug cartels. The
reasons for this failure should be examined by the Senate
Select Committee on Intelligence, in concert with the Senate
Committee on Foreign Relations, to determine what corrective
steps should be taken.

— In some instances, foreign policy considerations interfered with
. the U.S.'s ability to fight the war on drugs. Foreign policy pri-
orities towards the Bahamas, Honduras, Nicaragua, and
Panama at times delayed, halted, or interfered with U.S. law
enforcement's efforts to keep narcotics out of the United
States: In a few cases within the United States, drug traffick-
ers sought , to manipulate the U.S. judicial system by providing
services in support of U.S. foreign policy, with varying results.

— U.S. officials involved in Central America failed to address the
drug issue for fear of jeopardizing the war efforts against Nica-
ragua.

— The war against Nicaragua contributed to weakening an al-
ready inadequate law enforcement capability in the region
which was exploited easily by a variety of mercenaries, pilots,
and others involved in drug smuggling. The Subcommittee did
not find that the Contra leaders personally were involved in
drug trafficking. There was substantial evidence of drug smug-
gling through the war zones on the part of individual Contras,
Contra suppliers, Contra pilots, mercenaries who worked with
the Contras, and Contra supporters throughout the region.

— The saga of Panama's General Manuel Antonio Noriega repre-
sents one of the most serious foreign policy failures for the
United States. Throughout the 1970's and 1980's, Noriega was
able to manipulate U.S. policy toward his country, while skill-
fully accumulating near-absolute power in Panama. It is clear

3

that each U.S. government agency which had a relationship
with Noriega turned a blind. eye to his corruption and drug
dealing, even as he was emerging as a key player on behalf of
the Medellin cartel.

Policy and Priorities

-International drug trafficking organizations are a threat to
U.S. national security. Our government must first acknowledge
that the activities of the drug cartels constitute a threat of
such magnitude and then establish a more coherent and con-
sistent strategy for dealing with the problem.
-The threat posed by the drug cartels should be given a major
priority, in the bilateral agenda of, the U.S. with a number of
countries, including the Bahamas, Haiti, Colombia, Bolivia and
Paraguay. It should be among the most important issues with
a number of other countries, including Mexico and Honduras.
-In order to signal to. other countries the seriousness with which
the United States regards the drug issue, the President should
convene a summit meeting of Latin American leaders to begin
developing- a strategy to deal with this issue and related eco-
nomic problems.

-Narcotics law enforcement has often taken a back seat to other
diplomatic and national security priorities. The war on drugs
must not in the future be sacrificed to other foreign policy con-
siderations.

ADMINISTRATIVE RECOMMENDATIONS .

-The Treasury Department should begin negotiations on gather-
ing information oh large foreign U.S. dollar deposits, as au-
thorized by the 1988 Omhibus Drug Bill.

-The State Department should make a special effort to control
multiple entry visas from countries which are major drug tran-
sit countries or which harbor major drug organizations.

-The Federal Aviation Administration should undertake a
major effort to inspect hundreds of substandard aircraft, many
of which are used for smuggling illegal narcotics. These air-
craft are located throughout the United States, and those
which do not meet FAA specifications should be grounded im-
mediately.

-Individuals who represent themselves as working for the CIA
or other national security agencies of the United States Gov-
ernment, and who in fact do not, should be prosecuted prompt-
ly to the full extent of the law.

-All U.S. law enforcement agencies should devote significantly
greater attention to counter-intelligence in order to prevent
drug traffickers from penetrating their operations.

-The existing distrust among law enforcement agencies working
on the drug problem and national security agencies must be re-
solved. Ways must be found to make it possible for law enforce-
ment agencies to have access to national security intelligence
information related to the drug threat.

-Federal salaries of senior prosecutors and investigators must
be raised and special Senior Executive Service positions ere-

ated in order to encourage the most talented and experienced
personnel to remain on the job. * ■

Specific Legislative Recommendations

-The President should be f given a series of optional sanctions to
apply to major drug producing and drug-transit countries
which have not fully cooperated with the U.S. in drug enforce-
ment efforts. This would allow the President to certify a nation
under the national security provision of 481(h)(2)(a)(i)(ID, and
thus avoid the mandatory sanctions contained in current law,
while still giving him other - optional' sanctions. The proposed
sanctions wtiuld include: prohibiting ships that have-stopped at
such a nation within 60 days from discharging passengers or
cargo in the U.S.; denying landing rights ul the U.S. tothe na-
tional airlines Of such' a nation; subjecting goods and contain-
ers from any such nation tb'special inspections, quarantines, or
other additional regulations to prevent them from being used
to transport prohibited substahceV to the United States; deny-
ing or lmuting non-immigrant visas to nationals of any such
nation; elimmating Customs pre-clearance agreements with
any such nation.

-No government employee or official with responsibility for nar-
cotics issues in either the Executive or Legislative branches of
government should be permitted to represent a foreign govern-
ment on narcotics matters for a period Of three years after
they leave. The penalties for violating such a prohibition
should be the same as for violations of" the Federal Regulation
of. Lobbying Act of 1946. , : -, . . . , .

-The Department of State should he required to notify the Con-
gress within 10 days;,whenever it denies a- request from law en-
forcement for reasons.' of national security .or ■ foreign policy.
The notification should include a full description .of the reasons
for the refusal. Past decisions by the Department of State to
end law enforcement operations on such- grounds should have
been subject to Congressional review; this provision would
ensure that Congress remain in a position to exercise oversight
over such decisions; ; : .•

-The Department of State should be prohibited from entering
into contracts with any individual or company under indict-
ment or convicted of any narcotics-related offenses^ including
money laundering. The Department should be required to in-

. stitute procedures by which it >would routinely check with the
FBI, Customs and DEA to determine whether a company or in-
dividual is under investigation before the Department enters
into any contract with the company or individual.

-No U.S. intelligence agency should be permitted to make any
payments to any person convicted of narcotics related offenses,
except as authorized in writing by the Attorney General in
connection with the investigation or prosecution of criminal ac-
tivity.

-The Neutrality Act should be amended to apply only to actions
which are not specifically authorized by the State Department.
Each such authorization would require prompt notification by

5

the State Department to the House and Senate Foreign Affairs
and Foreign Relations Committees, and Select Committees on
Intelligence.

— The annual drug certification report should be required to
review links between international narcotics trafficking,
money laundering and international terrorism (mcluding guer-
rilla groups on the right and the left with regard to ideology.)

—The National Director of Narcotics Policy should be required
to report to the Congress on current U.S. federal personnel
practices affecting all persons engaged in the war on drugs to
determine whether adequate resources are being devoted to
hiring, training, promotion, and retention of federal employees
responsible for narcotics matters.

INTRODUCTION

Origins and Methodology

In early 1986, Senator John Kerry began a staff investigation of
allegations that elements of the supply network supporting the
Nicaraguan contras were linked with drug traffickers. In April,
1986, "Senator Kerry took information he .had developed to the
Chairman of the Foreign Relations Committee, Richard Lugar, who
agreed to conduct a staff inquiry into those allegations.

In response to a request by Senator Kerry, Senator Lugar sched-
uled a closed session of the Committee on Foreign Relations on
June 25, 1986, to discuss these allegations and to determine wheth-
er or not adequate attention and priority was being given to inter-
national narcotics law enforcement efforts generally. Senator
Kerry was concerned tShat because of the preoccupation with other
foreign policy "priorities relating to several, natibnsythe United
States was not dealing adequately with the growing 7 global drug
problem.

At that meeting, Senator Kerry raised questions as to the will-
ingness of the Administration to -investigate allegations of drug
trafficking involving the Contra supply network and the apparent
reluctance to deal- with Bahamian drug corruption for reasons of
national security. Senator Kerry noted that witnesses who had
brought this information to his attention had also . allegations of
drug-related corruption concerning Nicaraguan officials.

In response, the Committee, at the direction of the then-Chair-
man Senator Richard Lugar, decided that an investigation of drug
allegations relating to the war in Nicaragua should be undertaken.

In February 1987, at the direction of Chairman Claiborne Pell,
the Committee continued its investigative efforts^ expanding the
focus to include the impact of .drug trafficking.from the Caribbean,
and Central and South America on U.S. foreign policy interests. Li
April, the responsibility for the investigation was given to the Sub-
committee . on Terrorism, Narcotics and International Operations
chaired by Senator Kerry, with Senator McConnell serving as the
ranking-member.

The Subcommittee conducted fourteen days of open hearings,
nine executive sessions, and received testimony from 27 witnesses.
In addition, the staff deposed an additional 20 witnesses. Thirty

6

subpoenas were issued, many calling for the production of exten-
sive documentation.

The Committee sought, and received, documents from a large
number of government agencies, including the Drug Enforcement
A dmin is tration, the Federal Bureau of Investigation, the Depart-
ment of Defense, the Department of the Army, the Central Intelli-

§ence Agency, the Defense Intelligence Agency, the U.S., Customs
ervice, the Department of State, the Department of the Treasury,
the Overseas Private Investment Corporation and the National Se-
curity Council.

In, addition, the full Foreign Relation, Committee conducted ex-
tensive questioning of officials on the global narcotics problem in
1987 and 1988 in response to the annual International Narcotics
Control Strategy Report. That report is an annual submission to
the Congress mandated by the Anti-Drug Abuse Act of 1986. The
law requires the President to certify that major illicit drug produc-
ing country or a major drug-transit country cooperated folly with
the United States in the,, previous year, or took adequate steps on
its own, , with respect to illicit drug production, trafficking and
money laundering.

One hearmg-^as conducted jointly by the Subcommittee on Ter-
rorism, -Narcotics r and International Operatidns and the Subcom-
mittee on International Economic Policy.

In perparatioii for the hearings the staff interviewed dozens of
people in J and out of government. Many of ; these interviews were
kept confidential to ensure candid discussions. The Subcommittee
traveled to Costa Rica where' depositions were taken arid interviews
conducted with present and former government officials.

By agreement with Ch ai r man Daniel;Inouye of the Senate Select
Committee on' S^ret - MOrtary Assistance to Iran and the 'Nicara-
guan Opposition, the staff assigned to the investigation were
cleared to -review the documents provided to the Select Committee
in the course of its investigation. The Committee staff reviewed
thousands of Select Committees documents; including the classified
version of notebooks maintained by Oliver North during the period
he was at the National Security Council, the "North Diaries."

A number of witnesses and prospective witnesses were convicted
felons, having been imprisoned for narcotics-related offenses.- 1 The
Subcommittee made use of these witnesses m"a*ccordance with the
practice of Federal and .State prosecutors, who routinely rely on
convicts as witnesses in (ariminal -trials because they are the ones
with the most intimate knowledge of the criminal activity.-

All witnesses who appeared before the Subcommittee, did so
under oath and the threat of prosecution for perjury. The Subcom-
mittee did not and could not- offer reducea sentences in exchange
for testimony.' Before using 1 the testimony of convicted felohs^in a
public session, the Subcommittee staff attempted to corroborate the
witnesses' stories. Many of the witnesses were considered , suffi-
ciently credible to have been used by prosecutors in grand jury in-
vestigations and trials, including the major federal narcotics pros-
ecutions of General Noriega, Medellin cartel leader Carlos Lender,
and officials in Haiti and the Bahamas.

Gaining access to convicted felons and making arrangements to
have them testify required the cooperation of the ^Department of

7

Justice and numerous U.S. Attorneys. In some cases the coopera-
tion was excellent* while in others the Subcommittee confronted
one difficulty after another which delayed the investigation and
complicated the presentation of testimony in public hearings.

As this report is read, it should be kept in mind that the purpose
of the investigation was to identify the nature of the threat posed
by international drug trafficking and the adequacy of the U.S. gov-
ernment response to the threat. The Subcommittee was interested
in the larger policy questions and was. not seeking to develop spe-
cific cases against individuals.

The Scope of the Threat

When the Senate Committee on Foreign Relations began its in-
vestigation two years ago into drug trafficking, law enforcement
and foreign policy, this issue was widely viewed as being primarily
a law enforcement problem. While public debate over the drug
problem focused on improving international and domestic law en-
forcement efforts, the size, capability and activities of the cartels
were rapidly expanding.

There are probably few. issues which have caused greater strains
in our relations with other nations, particularly with bur Latin
American neighbors, than that of international drug trafficking.
The problem has given rise to a growing frustration in the Con-
gress over the seeming inability of . many nations in the hemisphere
to eliminate or curtail "the production or transshipment of cocaine
and marijuana destined for marketing in the United States. On the
other hand, there are valid concerns on the part of our Latin
American: allies that were it not for the. demand problem in the
United States, the drug issue would be of more manageable propor-
tions.

After two years of investigation carried out under the auspices of
the Subcommittee on Narcotics, Terrorism and International Oper-
ations, it is apparent that the United States is facing a significant
national security problem. It is a problem serious enough for us to
re-examine our perception as to what constitutes national security
threats to ourselves and ouf friends around the world.

In the post-World War II era, the national security focus of the
United States was framed by our predominant concern with East-
West competition around the globe. This concern with Marxist ex-
pansionism in general, and Soviet expansionism in particular, led
us to take a series of extraordinary steps to respond to the threat-.
These steps ranged from implementing the Marshall Plan for West-
ern Europe, to establishing NATO and other military alliances
around the world, to fighting conventional wars in both Korea and
Vietnam.

As the United States enters the decade of the 1990's, it is clear
that the operations of the international drug organizations also
constitute a threat of serious national security dimensions. J!n Latin
America, these, organizations, known as cartels, have become a
powerful supra-national political force with economic resources of a
magnitude to shape developments in Central and South America,
and throughout the Caribbean.

8

The most powerful -of the Latin American drug cartels are locat-
ed in Colombia. The Colombian cartels constitute an international
underworld so extensive, so . wealthy, and so. powerful, that today
they operate virtually unchallenged. They have organized them-
selves into elaborate conglomerates for the purposes of growing,
harvesting, processing, transporting, selling and repatriating their
profits from cocaine and marijuana. Menlike Pablo Escobar, Jorge
Ochoa, Jaime Guillot-Lara, and Carlos Lender,. formed ocean-span-
ning, mafia-like organizations capable, of very large and very com-
plex undertakings.

They have built coca processing centers in the nearly impenetra-
ble rain forests of the Amazon River Basin in Colombia — factory
complexes capable.,, in a week's time, of converting tons of coca
paste flown in from Peru and Bolivia into crystalline cocaine. The
finished product is then flown across the Caribbean and Central
America to the United States. It is estimated that there are five
dollars of profit for each dollar the cartels invest in the farm-to-
market process.

The magnitude of the profits associated with the international
drug trade is staggering. The June 20, 1988 edition of Fortune Mag-
azine reported, that the .global drug trade may run up to. $500 bil-
lion a year, more than twice the value of. all UJS. currency in circu-
lation.

As witness after witness stressed to .the Subcommittee, the car-
tels are driven by financial rather than ideological motives. They
are willing to do business with anyone as long as it helps further
their narcotics interests. Their power threatens ..to undermine re-
gional stability, and they have already demonstrated the capacity
to .destabilize democratic governments. These developments are
deeply inimical to the national security interests of the United
States. -

Domestic Effects of I>tcer^ational Drug Trafficking

To appreciate the degree to which the international drug traf-
fickers have affected the lives of the American people, one needs
only to analyze the statistics. Polls show that about 50% of all
Americans say they have had a relative or close friend who has
had a problem with illegal drugs and. one out of every three says
that illicit drugs can be purchased.within a mile of their home.

In addition:

— Sixty percent of all illegal drugs produced in the; world are con-
. sumed here in the United States;

— some twenty million Americans smoke marijuana, nearly six
million regularly use cocaine, and half a million are addicted
to heroin;

— the National Institute for Drug. Abuse reports that cocaine re-
lated hospital emergencies have, risen nearly 600 percent' be-
tween 1983 and 1987. Cocaine-related deaths have-risen from
under 400 in 1983, to nearly: 1,400* in 1987, the last. year for
which such statistics are available;

— it is estimated ■ that 70 percent of all violent crime, in the.
United States is drug-related;

9

-r-the street price for a kilo of cocaine in the United States has
plummeted from $60,000 in 1980, to approximately $9,000 a
kilo today. This has put cocaine within the means of the vast
majority of Americans, and shows how ineffective interdiction
efforts have been;

— between 1982 arid 1985, the amount of cocaine seized coming
into the United States more than doubled from 31 metric tons
to 72.3 metric tons. The problem has reached such crisis pro-
portions that various federal agencies involved in the . war on
drugs cannot come up with a reasonable estimate as to how
much cocaine reaches the streets of our country today;

— it is estimated , that cocaine usage among the work force costs
the United States $l00 billion a year in lost productivity;

— the American market for drugs produces annual revenues of
well over $100 billion at retail prices. This is twice what U.S.
consumers spend for oil each year.

' Effects on Foreign Countries

It is not only the people of the United States who are victimized
by the operations of the cartels. The cartels, utilizing corruption
and violence, -have literally bought governments and destabilized
others. ,

In. Colombia, the cocaine lords have coopted an entire nation and
its government. Beginning in 1984, efforts by the Colombian gov-
ernment to crack down and dismantle the cartels since 1984 have
led to unprecedented violence. In the past two years, 57 judges, in-
cluding half of the Supreme Court, and two cabinet officials have
been ' assassinated. A: year ago, Colombia's attorney general was
murdered by cartel assassins. - . "

While Colombia's democracy has been threatened, Panama's has
been , stolen. The relationship - established in the 1970's -between
drug traffickers and a littlerknown.officer in the Panamanian intel-
ligence—Manuel Antonio Noriega — has grown as -Noriega's power
has increased. As a result, Panama has become a safe haven and
critical base of operations for the cartels, particularly as a money-
laundering center., The trend toward democratization was reversed
in Panama, and Noriega now presides over the hemisphere's first
'^arcokleptocracy." 1 -

The corrupting influence of the cartels has now been felt
throughout Latin America and the Caribbean. The Subcommittee
received testimony^that remote islands in the Bahamas chain could
be rented for use as transit sites for cocaine and marijuana des-
tined for the United States. Despite the expenditure of significant
sums of money devoted to joint-interdiction efforts with the Gov-
ernment of the Bahamas, the International Narcotics Control
Strategy Report of March. 1988 estimated that 60 percent of the co-
caine and 50- percent of the marijuana coming into the United
States continued to transit that country. U.S. officials attribute the
problem to the continuation of drug-related corruption at all levels
of government.

1 See Subcommittee testimony of Ramon Mil inn Rodriguez, Part 2, p. 255.

10

In 1987, the Colombian cartels established a major, and secure
base of operations in Haiti, turning that country into another sig-
nificant transit point for cocaine coming into the United States.
The cartels bought protection from the upper ranks of the Haitian
military which, in turn established a distribution network in the
United States. This network is characterized by a high level of vio-
lence associated with its operations.

The cartels now pose a serious threat to Costa Rica, having es-
tablished themselves; in the northern war zones used by the Nicara-
gua insurgents. Costa Rica, the most free, stable and longest-
standing democracy in the region, continues to be ill-equipped to
deal with this threat despite the fact that it has the toughest drug
laws in. all of Latin America.

In Peru, there are reports that drug money funds the Sendero
Luminoso's efforts to topple the deniocratically-elected government
of that country.

In Bolivia, democratically-elected governments face an almost in-
surmountable task in destroying coca production and cocaine labs
operating with near impunity in that nation.

They haye corrupted local officials, including police and military,
in Mexico, and there are allegations that the corruption has spread
to higher-level officials. This development may be making an al-
ready serious situation worse, as Mexico continues to remain a
major producer of opium poppy and cannabis and continues to be a
primary source of heroin and marijuana entering the United
States.

Elements of the military in Honduras are involved in, drug-relat-
ed corruption, undermining, the fledgling attempts to establish a
truly democratic, civilian-based government in that country; Be-
cause of the pervasive influenced the Honduran military on;every
aspect of life in that country, there is concern that the experience
in Panama could be replicated in Honduras.

In Paraguay, drug corruption within the military also has been a
serious problem for some time. Despite the fact that Latin Ameri-
ca's longestetanding dictator, General Alfredo Stroessner, was
ousted recently in a military coup, U:S. drug, enforcement officials
are concerned that the narcotics trade through Paraguay will con-
tinue unabated.. As the State Department has acknowledged, there
are "frequent allegations that Paraguayan officials are involved in
narcotics trafficking" 2 General" Andreas Rodriguez', the master-
mind of the coup, has been linked in press reports as a major
figure -in the drug trade;

The National Security Implications of the Drug Trade

The cartels want stable governments in Latin America, but week
institutions which they can control. They want a climate in which
they can do business freely, without government interference. In
many countries of Latin America and the Caribbean, they have
succeeded in accomplishing this goal.

^International Narcotics Control Strategy Report, US Department of State, Bureau of Inter-
national Narcotics Matters, March 1988, p. 100.

11

In many instances, the cartels have allied themselves with orga-
nizations which are engaged in illicit movements of arms and am-
munition, for whatever purpose or whatever ideology — on the right
or the left. General Paul Gorman, in his testimony before the Sub-
committee, described the problem very succinctly when he ob-
served:

"If you want to move arms or munitions in Latin America, the
established networks are owned by the cartels. It has lent itself to
the .purposes of terrorists, of saboteurs, of spies, of insurgents, and
of subversives."

Such, alliances have been established with left-wing insurgent
groups such as M-19 in Colombia, and the Sendero Lumihoso in
Peru. General Noriega in Panama has been a major figure in the
clandestine arms trade, selling weapons to anyone or group who
would buy them, including the FMLN in El Salvador.

As the Subcommittee found, even the Nicaraguan Contras fight-
ing to overthrow the Sandinistas were not immune from exploita-
tion by narcotics traffickers.

If allowed to continue unchallenged, the operations of the cartels
will have even more serious implications for U.S. foreign policy in-
terests thoughout the hemisphere. If there has been one area of
foreign policy in which the Congress and the Reagan Administra-
tion found agreement during the last eight years, it was the desir-
ability of promoting and reinforcing the democratization process
which has swept Latin America over the course of the last decade.
This consensus was achieved despite the fractious debate over aid
to the contras.

Other than the international debt issue, the operations of the
drug cartels pose the most serious threat to the consolidation of de-
mocracy throughout Latin America. — The basic foundation upon
which democracy rests is respect for the rule of law and the guar-
antees it provides for mdividual rights and liberties. The cartels re-
spect neither law, nor the rights of individuals, nor the institutions
created to uphold the former and guarantee the latter. They have
demonstrated the ruthless capability to undermine and destroy any
institution or individual standing in their way.

Unfortunately, the international narcotics trade, historically, has
been relegated to the backwaters of U.S. foreign policy concerns. It
was not until recent years, when domestic cocaine usage reached
epidemic proportions and drug-related violence on the streets of the
United States reached crisis levels, that serious attention has been
paid to this problem. However, the issue is still not given attention
commensurate with the seriousness of the problem within most
agencies of the federal government. To date, the U.S. has been
unable to achieve effective coordination regarding the problem.
The Congress mandated the creation of a new position, the "Na-
tional Director of Narcotics Policy," informally known as the "drug
czar," in response to this concern. The drug czar will need to focus
attention on ensuring that the U.S. develops a strategy and allo-
cates the resources necessary to wage effectively a war on drugs.

12

- Synopsis of the Report

In preparing this report, the Subcommittee . has attempted to
define the nature of the problems associated with the operations of
the cocaine cartels. There are individual chapters devoted to Co-
lombia," Panama, the Bahamas, Haiti, Honduras, and Cuba and
Nicaragua. The, Subcommittee had neither the time nor the re-
source's to address other major problem countries such , as Mexico,
Paraguay, Peru, and Bolivia, of the emerging problems in Brazil!
Nevertheless, the problems and the patterns of corruption are 1 simi-
lar in. these countries as to those addressed by the £ubcornmittee.

A separate chapter is devoted to^ the allegations of involvement
of drug traffickers with the Contra movement and their supply op-
erations.

There is also a separate chapter devoted to the issue of . money
laundering, which is the key "to' the effective operations of the car-
tels. The phenomenal profit associated with the narcotics trade is
the foundation upon which the cartels' power is based. The Sub-
committee members believe that a . concerted attack on- the cartels'
money-laundering operations may be one of the most effective
means to strike at their most vulnerable point.

A separate chapter is devoted to an examination of the conflicts
between law enforcement agencies and the foreign policy and intel-
ligence agencies of the U.S. government. For example, the DEA
still maintains that it is receiving cooperation from Panama in
U.S. drug enforcement efforts. Yet William Von Rabb, the Commis-
sioner for U.S. Customs, has testified before the Committee that by
1983, U.S. agencies had more than enough evidence of General
Noriega's involvement in the narcotics trade. This, according to
Von Rabb, rendered any cooperation Panama was giving the U.S.
in drug seizures and arrests virtually meaningless.

The Report also includes appendices concerning the notebooks
maintained by Lt. Col. Oliver North, and their relation to the Sub-
committee investigation, and on allegations concerning interfer-
ence by government officials in the initial stages of the Subcommit-
tee investigation.

The members of the Subcommittee are hopeful that, if nothing
else, this report will stimulate significant debate and reflection
both within and outside our government. The stakes are very high
for us and for our friends throughout the hemisphere. This entails
understanding all the dimensions of the problem and the events
and circumstances that contributed to the development of the car-
tels. After ally violence and corruption associated with the narcotics
trade is not just a problem from Latin America and the Caribbean
Both seriously affect the quality of life in the United States as well.

Open Issues and Subjects Requiring Further Investigation

This report should be considered a first step toward a fuller un-
derstanding of the international scope of the narcotics problem.
Many issues arose during the course of the investigation which
could not be pursued in the 100th Congress because of the time and
staff limitations. There are open issues and questions which call for
further study.

13

1. The Subcommitte investigations of money launderirig allega-
tions involving the Bank of Credit and Commerce International
should be completed. Developing an effective strategy against
money laundering will require a more complete understanding of
the way drug traffickers move, hide, and invest the profits from
the profits from their illicit activities.

^ The Subcommittee's work thus far suggests that i£,-the> banking
system can be . closed to drug money and if assets owned by the
drug . cartels can be . -seized large scale trafficking, can be more
easily controlled. . • " ; '

2. Serious questions abut th,e adequacy of the Neutrality Act. in
controlling the activities of mercenaries and soldiers of fortune
arose during the hearings. The Subcommittee should examine, the
problems the Department of Justice has had using the Act and . con-
sider its revision.

3. The Subcommittee has received allegations that various fac-
tions in the Lebanese civil war are supporting their efforts with
drug money and that they have started to work with the Colombi-
an cartels. These allegations require, thorough examination; '

. 4; The Subcommittee has received allegations that heroin dealers
used the w,ar ih Afghanistan, as cover for their operations. There
are reports; of guns for drugs exchanges and significant drug relat-
ed corruption. The 1988 International Drug Control Strategy
Report, prepared -by the State Department^ obliquely acknowledged
the problem, stating /^dividual resistance elements- reportedly
engage in : opium production and trafficking as a source of income
to provide- staples for populations under their control and to . fund
weapons purchases." 3 Further it has been alleged that weapons for
the resistance were diverted to the international arms market.

5. The March, 1989 ; International Narcotics -Control Strategy
Report again -raised concern that drug-related corruption has con-
tinued to undermine narcotics law enforcement in Mexico. The
Report described the emergence in 1988 of "an, increasing number
of Colombian traffickers, within Mexico, involved primarily with
facilitating the transshipment of cocaine to the United States." 4
Ttie level of drug related corruption in Mexico continues to be a
priority concern of the Subcommittee, While there was neither the
time nor the resources to investigate thoroughly the . situation in
Mexico, this will be a continuing focus of the Subcommittee^ work
in the future.

Other pending business includes the effort by the Foreign Rela-
tions Committee to obtain access to an unexpurgated version of
Oliver North's notebooks. The notebooks contain numerous refer-
ences to the drug issue but could hot be deciphered because key
sections had been deleted by North and his attorneys. On April 6,
1989, those notebooks were turned over by North to the Independ-
ent Counsel in connection with his trial, when North waived his
Fifth Amendment rights and choose to testify. The Subcommittee
will continue to seek to obtain those notebooks. A detailed discus-

3 International Narcotics Control Strategy" Report, U.S. Department of State, Bureau of Inter-
national Narcotics- Matters, March, 1988 p. -178.

4 International Narcotics Control Strategy Report, U.S. Department of State, Bureau of Inter-
national Narcotics Matters, March 1989, p. 108.

14

siori of the North notebook problem has been included as an appen-
dix to -this report. ' - > -

THE BAHAMAS
Introduction V

Because of its geography, smuggling has beeri part of the Baha-
mian economy throughout its history. -The Bahamas is' a- chain of
700»1coral islands of which just 29 are inhabited. The Bahamian ar-
chipelago stretches 750 miles, from Cuba and Hispariibla to just 40
miles off the southeast Coast of Florida. - ' " * . >■■•: ■
- Ih-the' years after World War II, the development of the Baha-
mian economy focused on tourism, while -a group of British bust
nessinen known locally as -the "Bay Street Boys" controlled most
aspects of the local economy. The Bay . Street Boys represented
gambling interests, as well as the merchant class. In 1967 a more
broadlyrbased Bahamian^ Part^- the Progressive 1 Liberals Party
(PLP), led hy Lyndeh Pindling^ took power. ■

Within a year of its 1973 independence from Britain, Bahamian
law enforcement authorities were -warning' that drug trafficking
was a "serious problem," and by 1979, that problem was a crisis. 1

In : the late 1970's, both the narcotics smuggling -and government
corruption in the Bahamas grew at aii extraordinary fate. Initially,
marijuana was. the prmcipal narcotic smuggled through the Baha-
mas, but cocaine became an increasingly significant factor in "the
early 1980'sV As of 1983, the 1 Bahamas remained a major transit
country for both -drugs, with 50 to 60 percent of all the cocaine and
marijuana entering 'the U;S. transiting through Bahamian terri-
tory. 2 . - ••

Withess_ after witness appearing before the Subcommittee testi-
fied to using one or another Bahamian island to drop drugs for
transfer to fast boats or small, planes: 3 '

Luis "Kojak" Garcia, a former smuggler who gave up this voca-
tion voluntarily to become a DEA informant/testified that by di-
viding a load of drugs ; among ten fast Boats coining from ; the Baha-
mas he could limit the risk- of Interdiction to a fraction of the total
load. Customs, he said, would be forced to choose which of the ten
boats to intercept. They simply lacked the men and equipment to
stop all ten. 4 The witnesses Agreed that the U.S. Customs Service
and the Coast Guard could not possibly check the thousands of
boats and planes traveling regularly between the Bahamas and" the
United States. 5 ! : ••• •• - 1 ■ ••. \- -

While the geography of the. : Bahamas is ideal for smuggling; and
inadequate law enforcement resources . assure traffickers of being
-able to move signfficantf'quantities'of driigs to the United^ States
cooperation from Bahamiah officials to protect their operations

1 "Paradise .Lost," The London Sunday Times Magazine, Sept. 29, 1985 p 34
^International Narcotics Control Strategy Report, U.S. Department of State, March 1988, p.

» 'Subcommittee testimony of Gart Betzner, Part 3, April 7, 1988, p. 252 and Subcommittee
testimony of George Morales, Part 1, July 15, 1987, p. 60 and Part 3, April. 7, 1988 - p 306- also
see generally subcommittee testimony of Luis Garcia, Part 1, May 27, 1987 pp 5-^1

* May 26, 1987,- prehearing interview with Luis Garcia. "

6 Subcommittee testimony of Luis Garcia, Part 1, May 27, 1987, p, 12.

15

from interference has been essential. Typically, traffickers have
bribed local Bahamian Customs officials and police, and have hired
locals to unload and reload drug cargoes. When their operations
grew in size, the payoffs demanded from Bahamian officials grew
larger, and involved higher-ranking members of government. 6 ,

Luis Garcia, a major smuggler of marijuana who became a DEA
informant in 1983, testified:

.. I was heavily involved in smuggling drugs into the
United States for almost 4 years beginning in early 1979.
At that time, I supervised an operation which smuggled
tons of drugs mainly from Colombia and Jamaica by way
of the Bahamas with complete impunity. That was accom-
plished by paying for protection to the Bahamian authori-
ties from the lowest ranking officer. to the highest politi-
cians and officers. It is believed that if it was not for this
fact, my smuggling activities and those of many others like
me would hot have been so successful. 7
Garcia said payoffs were essential. Corruption,, he said, began
with airport and Customs inspectors, but continued to higher-level
appointed Bahamian officials. Garcia said he had. never paid bribes
to Bahamian elected officials. 8

According to Garcia, a typical shipment of 6,000 to 8,000 pounds
of marijuana cost : $130-150,000 in bribes to Bahamian officials.
Most of that went to police, immigration and custom- officials.
Among those bribed were the' chief of the Bahamian drug task
force, whom Garcia said he had on his payroll, and a former chair-
rrian of the PLP, the ruling party in the Bahamas. Official payoffs,
Garcia estimated were about 15 percent of the total cost of a mari-
juana shipment': 9

-In the early 1980's, the bribes ensured the smugglers a sanctuary
from U.S, patrols. As Garcia testified:

. .. . if somebody is chasing you up there 30 miles out in
the .ocean and you see them coming, you can turn around
&nd head: : hack into. jthe islands, and of course, you are
paying for protection. They are going to protect you ... if
ybufpay, ypu won't get arrested. 10

Growth of Official Corruption with Vesco and Bannister

In 1972, Robert Vesco fled the United States having been accused
by law enforcement authorities of looting $240 million from the
Overseas Investors Services mutual fund. Upon leaving the U.S.,
Vesco established operations in the Bahamas, developing a rela-.
tionship with a political "fixer" named Everett Bannister who was
close to Prime Minister Pindling; In time, Vesco gave Bannister
"carte blanche" at the Bahamas Commonwealth Bank. Bannister
and Pindling in return provided Vesco protection from extradition.
In part, as a .result of his dual relationship with Vesco and Pin-

6 Betzner testimony, Part 2, pp. 252-253; Morales testimoay, Part 3, p. 293, Part 1, p. 61 and
Garcia testimony, Part 1, p. 10.

7 Garcia testimony, Part 1, p. 5.

8 Ibid, pp. 6-11.
8 Ibid, pp. 7-10.
10 Ibid, pp. 13-14.

16

dling Bannister became increasingly influential in the Bahamas
and became known to many narcotics traffickers as a man who
could provide protection to them "from the top " 11

Bannister had left the Bahamas in the 1940's and lived for a
number of years in New York, before returning as a consultant
when the Pmdling government came to power in 1967. Bannister
then devoted his attention to providing assistance to clients as di-
verse as Resorts International, one of the Bahamas' principal gam-
bling operations, and to. Anastasio Somoza when he was a fugitive

&o m n^n C - agU ?' I n latter C£lse > Bannister reportedly received
J*WO,000 in cash from Somoza to buy him a safe haven. According
to his son, Gorman Bannister, his father said most of the money
was paid to the man." Gorman understood that to mean the
money went to Prime Minister Pimlling. 12

Everett Bannister assisted drug traffickers in a number of ways
He had them removed from the official "stop" lists, making it pos^
sible for traffickers to enter and leave the country without official
interference, and warned them df impending drug raids. 13

Use of Norman's Cay for Smuggling

/ Beyond his influence with high government officials through the
mvolyement utthe Bahamas Commonwealth Bank, a second conse-
quence of Robert Vesco's activities in the Bahamas was the arrival
?Lo < 2 a ^* ? >ca ? 1 f trafiad5fers..Vesco had left the Bahamas in
1974 after the bank failed and U.S.rpressure to extradite him grew
But he returned in 1978, after establishing a relationship with the
Colombian drug dealer Carlos Lender. Lender .and Vesco became
regular companions on the islands, and Lender decided to use the
t a f^b¥ **** hase : far smuggling cocaine, to the United States 14
T , i 97 XV Lehd .? r bought most of Norman^Cay, one of the Exuma
Manas, fifty miles,from Nassau. By the end of the year, Norman's
Cay waj; home to a group of some forty Lender employees who
drove the other residents and itinerant visitors away from the
island at ; gunpoint. Lehder built a large hangar which had cocaine
storage faculties inside arid was- using the island as a transship-
ment and distribution point for cocaine coming into the United
btates. 15

Lehder's behavior led a number of U.S. property owners on the
island to protest the confiscation of their property to the US Em-
bassy mNassau In July 1979, one of the -Americans, Professor
Richard Novak, delivered records of the. drug flights— supported by
photographs and movies— to the then American Charge d'Affaires
Andrew Antippas. After meeting with Antippas and the DEA offi-
cers stationed in Nassau, Novak returned to the island by small
plane accompanied by his son, to collect his belongings. Without
Novak s knowledge, Lehder had learned of his visit to the Embassy
and his complaints about the cocaine operation. Lender's associates
surrounded the plane when it returned, smashed the radios

11 Subcommittee testimony of Gorman Bannister, Part 1, May 27 1987 d 25
13 Bannisteriestimony, pp. ,26-28: >!»■*■«.

13 Garcia testimony, p. 15; Bannister testimony, pp. 34 36

14 Cocaine Island^" NBC Nightly News, April 30, 1987

"Bahamas: Smugglers' Paradise," NBC Nightly News, March 18, 1987.

17

drained most of the fuel and then forced Novak and his son to re-
board and take off at night. Novak and his son survived the result
ing crash. 16

At the end of August 1979, under intense pressure from the U.S.
Embassy, a police raid on Norman's Cay was scheduled. For rea-
sons never fully explained by the Bahamians, it was postponed for
fifteen days. When the raid finally took place, it was apparent that
during the intervening fifteen days Lehder had been warned and
the island had been cleaned up. As the police raid begari, Lehder
managed to destroy what little cocaine was left on the island and
although he was arrested, he was released immediately. The major
victims of the raid was a competitor of Lender's, a smuggler named
Ward, who was also using Norman's Cay. As a result of the raid,
Ward was arrested, put on the Bahamian Government stop list and
forced to move his smuggling operation to Haiti. 17

Despite two more "raids" on the island, about which Lehder also
received advance warning, the smuggling operation on Norman's
Cay continued without interference and in fact became even more
outrageous. Lehder then begari a public campaign against "police
harassment" and "U.S. imperialism." During the 1982 celebration
of Bahamian independence, Lehder flew his light plane over the
Nassau park where the festivities were taking place and dropped
leaflets saying "DEA Go Home." Many of the leaflets had $100
bills stapled to them. These leaflets showered on the heads of the
Prime Minister and U.S. Charge d'Affaires Antippas. 1 * 3

The Subcommittee received- testimony from Gorman Bannister
that his father Everett Bannister was the person who had tipped
Lehder off to the impending drug raids. As Bannister testified:

Senator Kerry. Did your father warn Carlos Lehder of
the police raid on Norman's Cay?
Mr, Bannister. Yes.

Senator Kerry. Do you want to describe that?
. Mr, Bannister. Well, as I recall, he just made a phone
call to Carlos letting hiiri know, . well, police are going
to

Senator Kerry. You heard the phone call?

Mr. Bannister. Oh, yes, yes, yes yes ... I know my
father did call him one time and told him, "Listen, the
police are going to raid Norrnan's Cay on a certain day,
clean it up." And when they went there, they didn't
find . . . anything." is

When an opposition member of the Bahamian parliament, -
Norman Soloinan, began to complain to Bahamian and U.S. au-
thorities about the situation involving Lender's use of Norman's
Cay for narcotics trafficking, his house and car were blown up. Ac-
cording to Gorman Bannister, Lehder boasted to .him and to his
father that he was behind the bombing because he didn't like Solo-
man depicting Lehder's Colombian employees in the drug trade as

16 "Paradise Lost," The London Sunday Times Magazine, September 29, 1985, p. 37.

17 Ibid.
ia Ibid.

13 Bannister testimony, p. 34.

18

"animals." Bannister testified that his father viewed Lender's deci-
sion to bomb Soloman as appropriate. 20

Everett Bannister was indicted in the Southern District of Mori-
da in March, 1989, on narcotics charges, following testimony before
the Grand Jury by his son Gorman.

Response by United States to Lehdkr Probi^em

.A Subcommittee staff review of the pertinent cable traffic from
the Embassy during the relevant period shows that the U.S. Em-
bassy continuously protested to the Bahamian government about
the Norman's Cay problem and routinely cabled Washington about
the scope of the problem in the early 1980's.

These cables led to a 1982 meeting between Vice President Bush,
Admiral Daniel Murphy and Bahamian Prime Minister Pindling,
at which the Norman's Cay problem was raised. The Vice Presi-
dent chastised the Prime Minister for what was taking place.
During the meeting, Prime Minister Pindling was shown a comput-
er printout of C5A surveillance of Norman's Cay and was told that
the island resembled O'Hare Airport because of its activity. 211

Despite this confrontation, there was no follow-up by the United
States. Instead, with the appointment of a new Ambassador,
United States-Bahamian relations focused on base rights negotia-
tions, and the drug issue was relegated to a" much lower priority.
The new Ambassador, Lev Dobriansky,. stated publicly that in his
view the most important issue in United States-Bahamian relations
was the negotiation of base rights for the United States. 22

Law enforcement .agencies and prosecutors in south Florida
noted the policy shift. These officials were attempting to obtain
State Department cooperation for sting operations aimed at Baha-
mian officials, and for their efforts to : extradite traffickers from the
Bahamas. These actions were met with indifference and in some
cases hostility from the Ambassador. 23

On September 5, 1983, NBC "Nightly News" exposed the Nor-
man's Cay scandal and directly accused the Bahamian government
of complicity in allowing Lender's operations to continue. The NBC
broadcast and the resulting outcry in the Bahamas led to the estab-
lishment of a Royal Commission of Inquiry to probe drug traffick-
ing and drug-related corruption in the Bahamas. The Inquiry
report led to the resignation of two cabinet officials and the pros-
ecution, but later acquittal, of some police officials. The operation
on Norman's Cay came to an end and Lehder returned to Colom-
bia. None of these events changed the role of the Bahamas as a
major transit point for cocaine traffickers or diminished the cor-
ruption within the Bahamian government.

Subcommittee hearings on the issue and a debate on decertifica-
tion of the Bahamas for failure fully to- cooperate with the United
States on drug enforcement issues generated renewed concern, and
narcotics again' became a major priority of the Embassy.

20 Ibid, p. 36.

21 Subcommittee testimony of Admiral Daniel Murphy, July 14, 1988, Part 4, pp 259-260

22 NBC, Broadcast, March 18, 1987.

23 Subcommittee testimony of Richard Gregorie, July 12, 1988, Part 4 pp 160-161

19

Extent of Bahamian Corruption Today

The State Department's annual report on international narcotics
control details the degree to which corruption remains today an es-
sential element of the Bahamas' status as a major drug transit
country.

According to the 1988 report, the Bahamas still is experiencing
"systematic corruption, which continues to make the Bahamas at-
tractive to drug traffickers." 24 The report notes that investigations
into official corruption appear to be limited to low-level enforce-
ment officers and fail to deal at all with higher-level corruption.
Even when corruption is found, suspected law enforcement or mili-
tary personnel are not normally charged or tried in court for their
offenses. Instead, they are merely forced to retire. 25

Other evidence of the continuing problem with official corruption
in the Bahamas is the re-nomination of George Smith and Kendall
Nottage for parliamentary seats by the Progressive Liberal Party.
Both won their seats despite the fact that they were identified in
the 1984 Commission of Inquiry Report as being involved in narcot-
ics-related .corruption. 26 Nottage was indicted March 29, 1989 by a
Boston federal grand jury on narcotics money laundering charges.

Although the Bahamian government passed a comprehensive
drug law in January 1987,. which includes a provision for the "ret-
roactive confiscation of narcotics derived assets," no arrests or
prosecutions under the new act took place in the year following its
enactment. 27 In 1988, only one. person, a Bahamian policeman, was
convicted under this provision. 28 . The March 1989 report stated
that "narcotics related corruption continues to be a problem,
making the country attractive to drug traffickers." 29

Similarly, extradition of drug traffickers remains a serious prob-
lem. The United States has for more than three years sought extra-
dition of Nigel Bowe, a Bahamian lawyer with strong ties to the
PLP and the Bahamian government. To date, the Bahamians con-
tinue to.stall his extradition. 30

The Bahamian response to the U.S. on the Bowe extradition
issue has been, inadequate at best. Bahamian officials argue that
Bowe is a rich man and using the best legal talent in the country
to delay extradition. What that explanation fails to address is the
question of why the Bahamians themselves have not investigated
Bbwe's activities. U.S. law enforcement authorities believe Bowe
has played a key role in organizing smuggling throughout -the Car-
ibbean — a matter which should be of some interest to the Baha-
mian authorities if they are indeed concerned . with cooperating
with the "U.S. in the war on drugs.

Nevertheless, the United States has continued to certify the -Ba-
hamas as providing "full cooperation" in fighting the war on drugs.
The United States has done so on the ground that the Bahamas

24 International Narcotics Control Strategy Report.

25 Department of State, March 1988 p. 151.

26 Ibid.

27 Ibid.

28 Ibid.

20 Ibid, pp. 154-155.

30 INCSR, Department of State, March 1989, p. 123.

20

has taken adequate steps on its own to control drug production,
trafficking and money laundering.

Assistant Secretary of State for Narcotics Matters Barbara' Ann
Wrobleski testified that the (f baseline issue" in determining wheth-
er to certify a country was whether there is "corruption to such an
extent that it has gotten in the way of cooperation." 31

The record developed by the Subcomittee, as well as the. State
Department's own international Narcotics Control Strategy Report,
document that corruption in the Bahamas continues to be the
major obstacle to cooperation.

- Bahamas Seeks to Influence U.S. Policymakers

In 1985, the increased public attention to the role of the Baha-
mas as a base for drug smuggling- led that government to seek the
advice of a U.S. public relations firm. The firmj Black, Manafort,
and Stone, submitted a memorandum to the Bahamian officials
suggesting that it could sell the United States government on the
importance of the Bahamas to U.S. security. In that memorandum,
Black, Manafort suggested that public attention be focused on the
demand side of the drug issue, thus diverting attention from the
narcotics-related' problems on the islands. The Black-Mahafort
principal -assigned to the matter; Matthew Freedman, was a former
senior State Department official who had handled narcotics
issues. 32 " '••

Shortly after the 1984 U.S. election, Black-Manafort advised the
Bahamian government that "perception by 'Official' Washington
will frequently drive the realities which will affect . . policy deci-
sions. In this regard; the Government of the Bahamas is operating
in a negatively charged atmosphere/' 33 : -' '

According to Black-Manafort, the Department of State and the
Department of Defense wished to maintain a "solid relationship"
with the Pindling Administration, but the DEA and the Depart-
ment of the Treasury were "active critics." According to the memo-
randum^ political critics of the Pindling government had been
"sowing the seeds that the Government of the Bahamas is a nation
for sale, inviting drug czars to "use the hanking system, that govern-
ment officials are participating in the drug trafficking, that the
Pindling Administration "is about to collapse and much more." 3 *

Black-Manafort advised the' Bahamian government that it
needed to lobby both the Executive and Congressional branches of
the United States government, beginning with the National Securi-
ty Council to mobilize political support for the Bahamas and to
focus the Departments of Defense and State so as to "affect Treas-
ury and Justice policy." The memo went on to suggest that the per-
sonal relationsnips between then Secretary of Defense Weinberger
and then Attorney General Meese could be used to redefine the pri-
orities of the U.S. in its dealings with the Bahamas. 35 Black-Mana-

31 Ibid, p. 122.

32 Security and Development Assistance, S. Hrg. 100-361, Part 2, March 16, 1987, p. 48.
3 3 Ibid, p. 44.

3 * Memorandum, Black, Manafort & Stone to Government of Bahamas, November, 1984.
36 Ibid.

21

fort was to charge the Bahamas $800,000 per year for representing
them on these matters, and the firm was ultimately retained by
the Bahamian government. 36

In addition, a former coordinator of the South Florida Drug Task
Force, Admiral Daniel Murphy, who participated in the previously
mentioned 1982. meeting with Prime Minister Pindling, testified
that, he solicited the Bahamas as a client for. his consulting firm,
Gray and Company. He was unsuccessful. 37

The role of the U.S. consultants raises troubling questions about
conflict of interest. Narcotics -issues are indeed "national security
issues." The Subcommittee believes it is not in the interest of the
United States to have former government officials, whether from
the Congress or the Executive Branch, who held policy positions
dealing with narcotics law enforcement, to use the knowledge they
have obtained to work for a foreign government whose, officials are
implicated, either-directly, or -indirectly, in the drug trade.

Bahamian "Cooperation"

Shortly after the Bahamian government retained U.S. public re-
lations consultants, it suddenly began cooperating on some drug
issues on the advice of its consultants. For instance, the govern-
ment allowed the installation of an aerostat radar, set up joint air
and naval operations and allowed U.S. authorities to enter Baha-
mian territory in hot pursuit of drug traffickers. Yet the coopera-
tion remained far from complete. For example, the government
continued to allow foreign nationals arrested for drug smuggling
leave the country after posting bail, and continued to make it diffi-
cult for yU.S. authorities to participate in the destruction of seized
drugs. 38

The Bahamian willingness to cooperate with -.interdiction efforts
has created a pro-Bahamian constituency- in interdiction-related
agencies such, as the Customs Service. But the increased level of
interdiction, cooperation has neither cut the amount of cocaine
coming into the United States from the Bahamas, nor has it led to
the destruction of the major smuggling organizations. .Indeed, as
Deputy Assistant Secretary of State for Inter-U.S. Affairs Richard
Holwill noted, a . . . notwithstanding the cooperation, there has
been ah increase in trafficking." 39 The Assistant Secretary of
State for International Narcotics Matters and the Administrator of
the D!EA acknowledged that the Bahamas remains a significant
transshipment point. 40

Conclusions

The case of the Bahamas illustrates many of the failings of
United States foreign policy as it relates to narcotics:

1. Policy was made at the Embassy level with little apparent
interagency coordination. When ambassadors changed; and U.S.
antirdrug efforts in connection with the Bahamas diminished, the

"Ibid.

38 Foreign Agent Registrations maintained by Secretary of the Senate, 1985-1988.
as Murphy testimony, pp. 263-264,

- 10 Subaimmittee testimony of Richard Holwill, July 11, 1988, Part 4, -p. 61.

22

wShS^Gn ttenti0n t6 thfe Pr0Mein W6Ilt iargel5r in

tf£ ^S e i^.? 0t J^ co ? rdina te d follow-up to strong initiatives!
The Vice President's meeting with Prime, Minister, findlihfe was

S-fT 6d + l y 4 f ? ur ^ ear r ? mtus before. significant pressure wis ex-
erted on the Bahamian Government relative to the drug issue

6. The Administration did not regard the Embassy in the"Baha-
mas as an important post because of the country's location size
and political system. Mr. George Antippas remained as the ^arge
tor more than two years before a new; Ambassador was appointed
as replacement ha^ httle experience in Garibheah affairs luid did
not exhibit any feeling for the importance of the drug issue The
current Ambassador has demonstrated an understating of the
drug assue, and has elevated this issue to the top of the U S -Baha-
mian bilateral agenda. -

4. There was little or no direct coordination between the U S At-
torneys in Florida and the Embassy in Nassau. The lack of coordi-
nation led law enforcement officials to believe that there was little
3£? mpursumg cases against Bahamian citizens or government
officials because they would get little support from thl State De-
partment on extradition or operational matters

Today^Bome of these 1 factors have changed. The U.S. government
appears to have recognized the significance, of the threat posed by
the continued use of the Bahamas as the most significant transit
point tor illegal drugs coming into the -United States. .There are
some areas^uch as m the arrest and deportation of drug traffick-
ers found smuggling through pre-clearance procedures, in which
tne_banamian government is now cooperating with the U S

Yet the Bahamas continues to be the major transit point for co-
caine and marijuana coming into the VS. Even though laws have
been enacted to allow seizure of drug-related assets, nosuch sei-
zures have taken place. Few; if any, drug traffickers arrested in the
+>S a ^fp are ^Y^d arid jailed. The result suggests to many
that the Government of the Bahamas is hot sincere, but engaged in
a rather cynical exercise to placate the United States

For-this reason one ' of the : most important issues in Uriitea
btates-Bahamian drug cooperation is extradition, especially of per-
sons mdicted in the United States~who have alleged ties to Baha-
mian government officials. - ? ^

In the past, the U.S. Customs Service has expressed some" con-
cern over the granting of pre-clearance privileges to other coun-
tries. Customs officials have argued that the United States stands
to lose control oyer the disposition of individuals charged with
crimes and arrested in- a foreign , country .with which we have such
agreements, particularly if there- have been historical problems as-
sociated with extradition. Customs lias Expressed the -concern that
some moWuals who otherwise would have been arrested , upon
reaching the U.S. may escape punishment following an arrest in
such a country. &

The State Department has argued, however, that pre-clearance
can serve the useful purpose of alerting . U.S. law enforcement au-
thorises that an individual charged with crimes will be entering
the U.S. on a specific date, time and place. This advance intelli-

gence can be used to ensure that arrests are made once the individ-
ual reaches his or her destination in the United States.

The pre-clearance agreement with the United States is very im-
portant to the Bahamian tourist industry. The Subcommittee be-
lieves that a thorough review needs to be undertaken regarding
this agreement, to determine whether on the whole it has reduced
the flow of narcotics to the United States from the Bahamas, or
has allowed narcotics traffickers to escape punishment. If the bene-
fits do not outweigh the costs, the U.S. should announce our intent
to terminate this agreement within one year unless substantial
progress is made in resolving these problems. In addition, the Sub-
committee , believes the President should retain, as an optional
sanction, the ability to terminate any nation that has customs pre-
clearance if it is determined the nation does not fully cooperate
with the U.S. in the war on drugs.

Appendix: Denial of Request foe Declassification

In this Chapter, there are five references to news media reports
on the Bahamas which are used to document the role of the Baha-
mas in the narcotics trade. On December 1, 1988, Senator Clai-
borne Pell, Chairman of the Committee on Foreign Relations,
wrote.the Department of State requesting the declassification of 11
U.S. Government documents which corroborate these news ac-
counts. On December 27* 1988, Chairman Pell was notified in writ-
ing by the Department of State that the „ declassification request
had been denied. The one document which the State Department
did not obejct to declassifying was a September 5, 1983, transcript
found in their files of an NBC Nightly News program entitled "The
Navy and the Bahamas." The Subcommittee believes strongly that
disclosure of all 11 documents is in the public interest to facilitate
public understanding of official responses to the war on drugs. The
State Department response of December 27,' 1988, and the Septem-
ber 5, . 1983, NBC transcript are included as appendixes at the end
of this section.

U.S. Department op State,
Washington, DC, December 27, 1988.

Hon. Claiborne Pell,

Chairman, Committee on Foreign. Relations,

U.S. Senate, Washington, DC "

Dear Mr. Chairman: I am replying to the request to the Department of Decem-
ber 1, 1988, that it review for declassification 11 documents which were transmitted
at that time. Concurrently, the Department was requested to retrieve on additional
document from its files and to review it also for declassification.

After careful review and consideration, we find that we have no objection to~the
declassification and release of document No. 1,

We have no objection to the release in part of documents Nos. 7, 10 and 11. Those
portions that must be withheld are bracketed in ink. In all cases where material has
been excised, the relevant subsections of Executive Order 12356, Section 1 3(a)(3) and
(5) are noted in the margin. We believe that despite the passage of time, the prema-
ture disclosure of this material would have an adverse effect on sensitive issues in
United States relations with The Bahamas. It contains foreign government informa-
tion provided in confidence and confidential US Government assessment and recom-
mendations.

Documents Nos. 2, 3, 4, 5, 6 and 8 must be withheld in full. Documents Nos. 2 4
' j ^ essentiaUv comprised of sensitive material, the disclosure of which
could adversely affect our bilateral relations with the Government of the Bahamas
These documents contain foreign government information provided in confidence as

24

well as confidential US assessment and recommendations. In addition, document
No. 3 wholly and documents. Nos. 5 and 6 concurrently, are comprised of delibera-
SSiSf ^ifn^k ™S o e ^^eld under Section (b)(5) of the Freedom of Infor-
mation Act (Title 5 USC Section 552) as comprising interagency or intra-agency
prSifeg? disclosure under the deliberative process or similai

m S b S ieV t tha i Dement of Justice has significant equities in two docu-
ments, Nos. 9 and 12, which we believe contain sensitive material, the disclosure of
which could be injurious to our relations with the Bahamas. As above, these docu-
ments contain foreign government information provided in confidence as well as
S^f^J?* 60 ™?™^ ^essment Therefore, the Department of Justice
PO m^inn^iTi ff^k We ^ ™? tten r ^ evant subsections of

t \,lflh ^^W^AP ^ the margm adjacent *> the sensitive material.

i understand that officers of the Department are in direct contact with your staff

SSK^TTiw 1 ?^ ^ you have ^'further questions, please con-
^r^F-J r f ie ^ k Snuth ' J *" of our Bur eau of Administration on 647-2207
With best wishes,

Sincerely,

J. Edward Pox,
Assistant Secretary Legislative Affairs.
Enclosures: Documents Nos. 1 through 12 '■'

[Memorandum]

To: Department of Defense: Attention: Ms. Helen Young
Program: NBC Nightly News, WRC-TV- NBC Network

Date: September 5, 1983, 7 p.m., Washington, DC '
Subject: The Navy and Bahamas. •

Tom Brokaw. Robert Vesco is American's most notorious fugitive. For years law
enforcement officials have been trying to naU.him on a variety of charges, most of
conSoSed disappearance of millions of dollars from a company that Vesco

Tonight in this Special Segment, Brian Ross describes how Vesco continues to live
his life on the lam in luxury, now in the Bahamas, where the Vesco connection &
powerful and illegal. -
Brian Ross. For more than four years now, this beautiful, seldom visited island in
the Bahamas, just 200 miles from, the Florida coast has been the base for one of the
higgest drug smuggling operations in the world. "

The island isjcaUed Norman's Cay, and here/ in the middle of nowhere?- a smug-
glers dream. Refrigerated hangars store tons and tons of cocaine and, a million
dollar paved runway long enough to handle jet planes.

This is tie man who dreamed the smuggler's dream, the man at the iop of the
Normans Cay smuggling operation: Robert Vesco, the accused Wall Street master
swindler who fled tie United States ten years ago and is now said to have made
millions of . dollars in the drug business in the Bahamas since the late seventies
when these pictures were taken.

He roams the streets freely, usually with not more than two bodyguards
Ross. This Florida drug agent worked undercover in the Bahamas
Man. Mr. Vesco was involved very heavily in the cocaine traffic, he was a maior
financier, he provided some of the muscle, protection for different groups of smug-
glers and that his— the majority of his empire was being held together by monev
that he was making from narcotics smuggling.

Ross. Federal agents have been following the Vesco drug business for at least two
years. This seized freighter is just one of dozens of boats and airplanes that agents
say Vesco has used to smuggle cocaine and marijuana into the United States

Authorities say Vesco's Colombian cocaine supplier Is this man, Carlos Lehder
like Vesco a fugitive from American justice. '

But Federal authorities say that even with all they know about Vesco's drug busi-
ness, the ships, his Colombian connection, his island drug bust; even knowing all
that, they haven't been able to stop him.

Second Man. Law abiding Christians

[Crowd reaction.]

Ross American authorities say Vesco is just too well protected in the Bahamas bv
some of the leaders of the ruling party, the PLP, the Progressive Liberal Party

A Justice Department intelligence report says a Vesco associate has been/ ; alleg-
l1£ie P MSIte? Br0Xmia ¥100 ' 000 P er month m Bahamian officials, including

Mr. Prime Minister, can we talk to you?

25

Prime Minister Lynden Pindling declined to be interviewed by NBC News about
allegations of corruption in his government.

In public,- as at this rally last week, some of the very Bahamian officials suspected
of being involved in drug, corruption with Vesco and others, speak boldly against
drugs. _

Third Man. I say crime and drugs is frustrating our positive image in the coun-
try.

Ross. This is Kendal Nottage a member of the Bahamian parliament and a cabi-
net minister. NBC News has learned that this summer, the FBI was actually
making plans to try to arrested Nottage as part of a big Federal effort to crack
down on the drug business.

The plan was lite ABSCAM. To get Nottage on a private yacht just outside Baha-
mian waters; to get him to take a bribe with hidden cameras rolling. But the plan
was blocked at the American' embassy in Nassau.

Ambassador Lev E. Dobeiansky. I've stopped it.

Ross. United States Ambassador Lev Dobriansky says one of the reasons he
stopped the FBI investigation was that it might upset delicate negotiations with the
Bahamians over a US Navy submarine testing base in the Bahamas.

Ambassador Dobriansky. This could be very embarrassing — it could — naturally
would be— and it could be very destabilizing. When you look at the total picture: I
mean our relations with the Bahamas is not solely in the drug area, there are many
other things which, over the long pull will be more important than the drug.

Ross. Federal authorities say 70 percent of the cocaine and marijuana coming into
this country is coming through the Bahamas.

Foukth Man. South Florida is not rid of all of it yet, not as long as we have the
Bahamas over there.

Ross. Police in Florida are making dozens of drug arrests every day but the
supply of cocaine hasn't gone down, it's gone up. And it's gone up because of the
wide open operation of drug bases like this one on Norman's Cay, run by American
fugitiye Robert Vesco, said to be protected by .Bahamian officials and tolerated by
American -diplomats more concerned with "the Navy bases in the Bahamas than
drug bases in. the Bahamas.

Brian Ross, NBC News, in the Bahamas.

COLOMBIA
. Introduction

Colombia is the oldest democracy in Latin America and, until re-
cently, has enjoyed one of the continent's most buoyant economies.
However, as previously noted, "Colombia's economic and political
future is being threatened by narcotics trafficking organizations
known as cartels.

General Gorman aptly characterized the state of affairs in Co-
lombia today when in testimony before the Subcommittee he
stated, "the narcotrafficking organizations . . . through bribery, ex-
tortion, and intimidation, . . . became better informed and more
politically powerful . . . than the government." 1

While there are dozens of drug trafficking organizations in Co-
lombia, two cartels, the Medellin and the Cali, dominate the illegal
narcotics trade. They have transformed the cultivation, processing
and distribution of cocaine from a small business into a powerful,"
vertically integrated, multinational industry. Their political and
economic influence is felt not only in Colombia, but throughout
Latin America. What they cannot" buy, they take, often using vio-
lent means to achieve their goals.

The Subcommittee received testimony from several witnesses-
who stated that the cartels are not driven by any ideology, but
view themselves as nothing more than businessmen. They favor po-

1 Subcommittee testimony of General Paul Gorman, Part 2 Feb. 8, 1988, -p. 31.

26

litical stability, but iii the context of a government over which they
exercise control. In Colombia, democracy still exists, but many, of
its institutions have been reduced to near impotency; The Colombi-
an judicial system, for instance, has been effectively neutralized as
the government has proven incapable of arresting or prosecuting
the major traffickers, much less extraditing them to the United
States.

In many -respects, Colombia is the country that holds a key to the
future of cocaine trafficking in this hemisphere. As Golombiah nar-
cotics trafficking has .increased, and the violence and corruption in
that country have worsened, there have been differences in the
U.S. government as to the appropriate strategy to pursue.' These
differences have undermined anti-narcotics policy in that country.

Testifying before the Subcommittee, General Paul Gorman, .the
former head of the U.S. Southern Command, detailed shortcomings
in U.S. narcotics policy as it related- to Colombia. Gorman made
four points:

First, we have been promising the Colombians material
help since 1983. We have simply not ielive^d. Whether
that help is radars or modern helicopters or actionable in-
telligence, the rhetoric of the United States has consistent-
ly outrun' its performance.

Second, we have reached .for short-term measures, in ' ' =
effect, apply Band-Aids to what is a massive social trauma.
We have not sought to devise with the Colombians a long-
term comprehensive strategy for dealing with the haf co-
traffickers, one which would draw upon the respective
strengths of both countries.

Third, we have failed to. bring American technology to
: bear, either for short-term tactical advantage or for longer
range developments which might promise a decisive strate-
gic defeat for the narcotraficantes.

And four, the U.S. has failed to engage the capabilities
of the Colombian Armed Forces. 2
Gorman characterized U.S. efforts in dealing with the Colombi-
ans on this problem as having been "half-hearted." 3

Origins of Narcotics Trafficking in Colombia

During this decade Colombia has gained the infamous reputation
as the preeminent country in Latin America associated with co-
caine trafficking. Ironically, however, Colombia became a center
for global drug trafficking as a result of the trade in marijuana.

The cultivation of marijuana was introduced to Colombia by Pan-
amanian growers around the turn of the century. However, it was
not grown in any significant quantities until demand, in the United
States mushroomed during the 1960's. By the middle of the 1970's
Colombia had emerged as a major marijuana supplier to the
United States and by the end of the decade had actually supplant-
ed Mexico as the chief source for marijuana worldwide. 4

2 Subcommittee testimony of General Paul Gorman, Part 2, Feb. 8, 1988, pp. 33-34.
» Ibid p. 33.

* Bag&y, Foreign Affairs, Vol. 67, No. 1, p. 7S.

27

With the marijuana trade came two important developments: the
Colombian narcotics trade became a multimillion dollar industry
and a criminal narcotics infrastructure was established in both Co-
lombia and the United States. The Subcommittee received testimo-
ny from convicted marijuana smuggler Leigh Ritch that clearly il-
lustrated both of these developments. 5

Leigh Ritch began his criminal career in 1969 by unloading bales
of marijuana from Colombian drug boats that docked in west Flori-
da. He was nineteen years old and making between "five and ten
thousand dollars, only" — a night. By the late 1970's Ritch employed
dozens of people and was using his own sailboat to smuggle mari-
juana valued at some $40 million a shipment. At the time he was
arrested in 1986, Ritch had a barge ready to leave Colombia that
was loaded with more than one million pounds of marijuana and
valued at between "$300 and $400 million." 6 Ritch had profited
enormously from the marijuana trade, but his profits never ap-
proached those made by major Colombian criminals in the cocaine
industry.

Coca, the base for cocaine, traditionally was grown and used by
Colombian natives for generations, but was not produced for export
until the. late 1960's when a small Cuban-American criminal orga-
nization in Miami began to smuggle the drug into the United
States. The cocaine was transported from Colombia to Florida by
mdividuals known as "mules" who "carried a few kilograms at a
time with their personal belongings on commercial airlines.

This small scale smuggling of cocaine into the United States
became a major enterprise in the 1970's when a group of Colombi-
ans including, Pablo Escobar, Jorge Luis Ochoa Vasquez and Carlos
Lehder, seized control of the existing cocaine distribution networks
during a period of violent confrontation known as the "Cocaine
Wars." 7 The Colombians organized their own distribution system
and began to ship cocaine in bulk to the United States. By the late
1970's they had established criminal organizations in both Colom-
bia and the United States. However, it was not until 1982, when
faced with a threat from Colombia's most powerful terrorist organi-
zation, the M-19, that the various Colombian cocaine organisations
banded together to from the world's most powerful drug trafficking
organization, the Medellin Cartel.

Origin of the Cartels

In 1980, the M-19, which began as a fiercely Marxist revolution-
ary and terrorist movement inside Colombia, undertook a series of
kidnappings of wealthy individuals who were them held for
ransom. Two years later M-19 kidnapped a member of the Ochoa
family, one of the leading criminal families in Colombia. 8

In response to the kidnapping, Jorge Ochoa, the family leader,
called a meeting of the drug kingpins at his restaurant on the out-
skirts of Medellin, Colombia. Each drug kingpin who attended the

6 Ritch is serving a SO year sentence without parole in a Federal prison for directing a crimi-
nal enterprise.

6 Leigh Ritch testimony, Feb. 8, 1988, p. 63.

7 Foreign-Affairs, Vol. 67, No. 1, p. 74.

a Subcommittee testimony of Ramon Millian Rodriguez, Part 2, Feb. 11, 1988 p. 248.

28

meeting reportedly contributed $7 million to create an organization
called "Death to Kidnappers" or MAS, which-was dedicated to
ending left-wing kidnappings and extortion. As described by Milian
Rodriguez, the cartel wanted to "get rid of a threat both politically
and economically. You must remember M-19 is Marxist Leninist in
ideology and the cartel is a capitalist enterprise." 9

The newly formed drug trafficking organization, which came to
be called the Medellin Cartel, raised a 2,000 man army and
equipped it with automatic weapons. This army subsequently en-
gaged, the revolutionaries in a bloody war, and won a decisive victo-
ry. 10 Milian Rodriguez testified that "not only were the M-19
killed brutally, but the brutality was made public . . . the victims
were hung lip from trees, they were disembowled, with signs on
them to discourage the population from cooperating with them." 11

When the violence subsided, the victorious cartel forged an alli-
ance with the defeated remnants of the M-19. As a result, the M-
19 had become an enforcement mechanism for the Cartel, using its
soldiers to protect narcotics shipments and intimidate the Colombi-
an government. In return for providing these services, the M-19 re-
ceives money and weapons from the Cartel. 12

The war with M-19 also resulted in a loose alliance of the key
leaders of the drug trade in Colombia. After the war, when prob-
lems ^ arose for the drug industry, the individual traffickers met to
work out solutions. For example, one witness described a meeting
of the trafficking organizations to discuss the problem of extradi-
tion to the United States. According to the witness, the leaders of
the drug trade discussed the possibility of approaching officials in
the U.S. Government to' negotiate .the issue. 13 -
. Cooperation among the trafficking organizations has even been
extended to risk-sharing associated -with drug shipments sent to the
United States. -As the International Narcotics Control' Strategy
Report says, "shipments appear to belong to several organizations.
This avoids sending half empty planes or boats; and, more, impor-
tantly, immunizes individuals in the event of seizure. It is reported-
ly now possible to insure a load against seizure." 14

As cooperation among the Colombian drug organizations in-
creased, so did the. production of cocaine. For example, in Florida,
in the spring of 1982, Customs officials at Miami International Air-
port discovered 3,906 pounds of cocaine— more than four times the
previous record seizure. That seizure, despite its size, did not drive
up the price of cocaine on the streets, suggesting that the flow had
not been mterrupted in any meaningful, way.

Organization and Wealth

The cartels became in essence, vertically integrated businesses,
controlling anywhere from 60%. to 80% of all the cocaine coming
into the United States. The Medellin Cartel, in particular, perfect

3 Ibid, p. 248.

10 Foreign Affairs, Vol. 67, No. 1, p. 76.

1 1 Subcommittee testimony of Ramon Milian-Rodriguez, Part' 2; Feb. 11, 1988 p. 249.

12 Subcommittee testimony of Richard Gregorie, July 12, 1988, pg. 130. " ■

13 Closed Subcommittee testimony of Miami Lawyer, April 6, 1988, p. 84.

14 International Narcotics Control Strategy Report, U.S. Department of State, March 1987

29

ed the cocaine smuggling business into a high-tech trade based on
specialization, cooperation and mass-production. Escobar was re-
sponsible for the production side of the business, the Ochoas han-
dled processing and transportation, and Lehder, prior to his arrest,
handled the distribution, end. General Gorman characterized the
organizations as "mafia-like rings capable of very large, very com-
plex undertakings demanding significant discipline and very tight
management." 15

One witness described how the Cartel leaders are served by an
array of "underbosses" who handle specific contract assignments. 16
Many of. the underbosses made arrangements with North Ameri-
can "transportation organizations" which flew Cartel drugs to the
U.S. where the cocaine was then turned over to the Colombian dis-
tribution network in this country. Altogether, law enforcement
sources estimate that the organizations have more than 8,000 mem-
bers. 17 ..

This complex aiid elaborate organization earns an estimated $8
billion for the cartels each year. Forbes Magazine has listed Ochoa
and Escobar as among the richest men in the world. 18

The cartels have invested these profits in vast real estate hold-
ings in both Colombia and the United States. The Miami Herald
described Hacienda Veracruz, the Ochoa family ranch in northwest
Colombia, as "so huge it encompasses several towns inside its bor-
ders between Barranquilla and Cartagena. 19

In testimony before the subcommittee, a Miami lawyer who met
cartel members in Colombia described an enormous ranch with
many thousand head of cattle, a palatial farm house and sw immin g
pool. 20

Ramon Milian Rodriguez, who claimed to have been to the homes
and ranches of all the major cartel members, described the ranches
as "effectively pretty self-sufficient entities . . . that generate their
own electricity, ... the only thing they need is a source of fuel.
Everything else is. either grown or there are substantial supplies."
Rodriguez testified that he had been tasked with buying animals
for a private zoo on one of the ranches. He said, 'Tve imported rhi-
noceros and other weird animals that you wouldn't believe." 21

Rather than being perceived as outlaws and outsiders in Colom-
bian society, the drug lords increasingly are acknowledged as the
single most powerful economic entity in Colombia. They own news-
papers and broadcasting companies, and one-third of their income
is invested in Colombian industry, real estate, and agriculture.
There is' cartel involvement in over one-half of the Colombian
soccer league. CarteL leaders have passed out money to poor farm-
ers and supported Colombian charffies. Where they have not been
able to buy political influence, the cartels have resorted to violence.

15 Gorman, Part 2, p. 30.

16 Closed deposition of Carlton, December 4, 1987, pp. 146-147.

17 "America's Cocaine Connection," The Miami Herald, November 29, 1987, p. 28A
ia Forbes Magazine, July 25, 1988, p. 64.

JB "America's Cocaine Connection," The Miami Herald, December 2, 1987, p. GA.

20 Testimony of Miami Attorney, ibid, pp. 27-28.

21 Milian Rodriguez, Part 2, p. 183.

30

The Cartel's War Against the Colombian Government

In 1983* the cartels established large scale processing facilities, jn
the Amazon region of Colombia at a location called Tranquilandia.
The facilities, which were discovered and dismantled by the Colom-
bian authorities in early 1984, were producing between two and
three tons of cocaine a week. Astonishingly, the destruction of the
Tranquilandia labs did little to disrupt the cocaine trade.

The 1984 Tranquilandia raid was a direct Colombian government
challenge to the cartels' power. In the months that followed the
raid, the government tried to shut down 1 the cartels with an agres-
sive search arid seizure campaign. -

Instead of retrenching, the cartels launched an open war against
the Colombian government. The cartels- employed the tactics they
had used in their war against the M-19; a highly visible campaign
of violence was directed at prominent Colombian officials and crit-
ics. For example, on April 30, 1984, 50 days after the Tranquilandia
raid, assassins killed Colombian Justice Minister Rodriguez Lara
Bonilla in Bogota. Drug pilot Floyd Carlton- described in detail how
the Ochoa brothers contracted for Bonilla's death: ". . . before they
killed this Minister of Justice in . Colombia, there was, like, a kind
of blackboard, where, there was a photograph of Minister Bonilla,
and. everyone talked about the fact that the son-of-bitch, that guy
have to be killed, that son-of-a bitch." 22

The Minister of Justice is not the only Colombian to have been
brutally killed by the cartels. In 1986 Colonel Jaime Ramierez
Gomez, head of the Colombian National Police's Anti-Narcotics
Command and the man responsible for the seizure of some 27
metric tons of cocaine during a three year period, was assassinated.
He was shot twenty-eight times in front of his wife and children.
On ■December 17* 1986 GuiUermo Canu Isaaca, the crusading anti-
narcotics editor of the Bogota daily newspaper, El Espertador, was
assassinated on his way home€rom work.

The killings were "carried out by hired organizations"' from the
Medellin slums. Yet, none of the leading cartel members have ever
been directly implicated in any of the murders, and as one U.S.
Drug Enforcement Administration official bemoaned: "There isn't
a cop that will arrest them; there isn't a judge that will try them-
there isn't a jail that will hold them." 23 -

Adequacy of Legal and Law Enforcement Measures

The power the cartels have exhibited and their ability to operate
safely in Colombia raises the question of whether the Colombian
government has the capacity to challenge seriously the drug trade;
On the one hand, the casualties among Colombian law enforcement
officials, judges and government officials speak eloquently about
the sincerity of the Colombian effort. John Lawn told the Commit-
tee that he felt the Colombian police and military authorities had
been "active in the interdiction of cocaine and marijuana, as well
as cocaine essential chemical shipments." 24

22 Carlton, Part 2, p. 147.

23 INCSR, Department of State, 1987 p. 93 and "America's Cocaine Connection " The Miami
Herald, December 3, 1987 p. 20A.
24 Lawn, p. 6.

3i

At the same time, the tact that the cocaine trade has grown
steadily in size and scope, and that the cocaine organizations con-
tinue to operate with impunity, suggest that the campaign of cor-
ruption and violence has taken their toll on the Colombian govern-
ment.

The U.S. Department of State in its 1988 International Narcotics
Control Strategy report concluded that Colombia "does not yet
have a coordinated strategy to combat the traffickers, and the judi-
ciary, in particular, is virtually paralyzed." 25 That paralysis is ex-
emplified by the problems associated with extradition of Colombian
narcotics traffickers to the United States.

What the members of the cartels fear most is extradition to the
United States. When the extradition treaty between the United
States and Colombia entered into force in 1982, the cartels reacted
swiftly. First, they launched a public campaign to have its constitu-
tionality tested in the courts. Second, a terrorist unit broke into
the Colombian Supreme Court building and murdered eleven sit-
ting judges. The attack, which occurred on November 6, 1985 at the
Palace of Justice in Bogota, resulted in more than 100 fatalities.
Although the attack was attributed to M-19, it was clearly related
to narcotics trafficking since those involved in the assault burned
all of the files relating to pending extradition cases.

The United States has nevertheless twice tried to extradite Jorge
Ochoa from Colombia to the United States. Ochoa was indicted for
narcotics smuggling in 1984. U.S. Drug Enforcement Administra-
tion officials estimate that Ochoa has moved nearly sixty tons of
cocaine into the U.S. between 1982 and 1987.

The first extradition effort, was undertaken when Ochoa was ar-
rested in Spain in 1985 on drug trafficking charges. The United
States requested extradition from Spain, but Ochoa's lawyers per-
suaded the Colombian government to file for his extradition to his
home country on the same charges. The Spanish judge decided to
send Ochoa to Colombia where a judge released him on short order.

However, the extradition request was not pursued very aggres-
sively by the US. government. Assistant U.S. Attorney Richard
Gregorie complained about the Department of State's attitude re-
garding the extradition of Ochoa from Spain. He described his
meeting with U.S. embassy officials in Madrid, noting that, "I dealt
with a very nice secretary, but she was the most knowledgeable
person in the embassy as to what was going on with the extradi-
tion. ... here is the most significant dope dealer in history, and
they've ..got this nice little old secretary who is the only one who
knows everything there is to know about this guy getting extradit-
ed." 26 : ' "

Gregorie went on to say that when Attorney General Meese
became involved in the case he (the Attorney General) did not re-
quest a briefing by the federal prosecutors directly involved in the
case. In addition, Meese did not debrief federal prosecutors han-
dling the case on his discussions with Spanish government offi-
cials. 2 7

2S INCKS, 1988, p. 86.

20 Subcommittee testimony of Eichard Gregorie. Part 4, pp. 144-145.
27 Ibid.

32

In November 1987, Ochoa was arrested by the Colombia police
and held in custody in Colombia on a charge of megaUy^hnportw
bulls into the country. The U.S. then sought to hale OcC P eSS
dited without re W on the extradition treaty between thetwo
countries which had been declared unconstitutional by the Co W
bian Supreme Court. The Colombians repeatedly assured U S offi-
S^fy wanted to exfradite Ochoa to theUnited States but
had to find a legacy and politically acceptable way to do it
. a uT e ^ Wee ^ Sf frustrating discussions in which one legal techni-

S^w 3 ?^ WaS T T ed > a S°^ mhian judge released OcC;
saying that he had served enough time in jail on the charges for

I™ fl ™ rtei ^ F nit6d States P r ° teste * the rS and
the Colombian government began an investigation of the judged

release - However - d ~ was

On the U.S. side the second attempt to extradite Ochoa from Co-
l<mibia was handled at J-fae desk and regional officer level of ttie
State Department for the first several weeks. The only indication
of high level interest^ the matter was a letter from Attorney
General Meese to the Cobmbians. It was only after Ochoa waTr?

^S^J^^S^ Keagan the ^directly

victed on federal racketeering charges in August of 198S! and is cur-
rently serving a life sentence in federal prison The State rw,w- *
ment attributed the Lender extradition to the feet that all TeS
proceedings in the case were completed before the Colombian Su-

KpWrtT? 1 ?* ^ tr eaty was unconstitutional.

Throughout the dnjg world, however, it is widely believed that
Lender was extradited because his fellow drug dealers viewed him
as a habuity and wanted him out of the business. LeWs *E
leagues felt he was talking too much, using cocaine heavily, and .
that his actions were attracting too much public attention's Ac-
cording to these sources, the cartels let the Colombian government
know they would not object to his extradition '
. The extradition problems in Colombia have pointed up the signif-
icant and more generic problems of government corruption in that
country. John Lawn, DEA Administrator, testified that "mdivid'
uals who cannot be corrupted are given the option of silver or lead
and judges m Colombia are ;given that particular option^that is
take the money or be Mlled-even those good individuals m telvs
environment find themselves corrupted " 29 : 7

^iif^ Subconmiittee was told that many Colombian offi-

■SSrSClS? ^ t0 ? e ? or Le» Kitch found

^X? JfS^ law . enfo 5f em ent non-existent. . . you could load
right at the dock in certain cities where the loading would take
place, you know a city, or pay terminal " so e -

Floyd Carlton -described how the murder of Justice Minister Bo-
mlla was actuaUy coordmated with individuals inside the ministry!

" La^PartT te fJ mony ofRoman Eodriguez, June 25, 1987, p. 84.

30 Hitch,' Part 2,' p.' 63." -

33

"I'm there with Jorge, Fabio [Ochoa brothers], both of them. . . .
and suddenly, I heard a conversation in which right — apparently
right from the ministry, offices of these people, information was
being given to them. Apparently, they knew that this gentleman
was going to leave the position of ambassador, and he was going to
go somewhere else." 3X

Conclusions

The Colombian drug cartels have succeeded, at least for the time
being, in securing their havens of operations against government
attempts to crush their activities. Using violence and bribery, they
have made it all but impossible for the Colombian government to
arrest and prosecute them.

The United States has not devoted the necessary resources to law
enforcement intelligence gathering. The cartel, as General Gorman
has pointed out, has better equipment than the U.S. Air Force.
General Gorman testified that "they use satellite radios. They have
encryption devices and voice privacy mechanisms." 32

Perhaps the most effective weapon that the United States had
against the cartel was the extradition treaty with Colombia. Extra-
dition to the United States might cause serious damage to the co-
caine trade, but the cartels have been most effective in preventing
serious consideration of that solution' within Colombia.

Moreover, extraditing major narcotics traffickers from Colombia
and most other countries may well have become further complicat-
ed by the death penalty provision in the 1988 omnibus drug bill.
According to Assistant United States Attorney Richard Gregorie,
most countries, including Colombia, will not extradite one of their
citizens if that individual might face the death penalty in the re-
questing country. Gregorie testified before the Subcommittee that
for this reason he thought the death penalty was "counterproduc-
tive" to bringing the drug lords to justice. 33

There is contradictory evidence over the amount of narcotics as-
sistance that the United States has provided to Colombia. The
State Department claims to have given Colombia substantial assist-
ance with which to wage the war on drugs.

However, according to General Gorman: "We have been promis-
ing the Colombians material help since 1983. We simply have not
delivered. Whether that help is radars or modern helicopters or ac-
tionable intelligence, the rhetoric of the United States has consist-
ently outrun its performance." 34

Based on testimony, there are areas in which the United States
can- Jielp Colombia fight against the cartels. These include an in-
crease in specialized assistance in communications and training for
anti-narcotics police. General Gorman suggested that the United
States should strengthen efforts to work with the elements of the
Colombian military and the police who have shown that they are
willing to take on the drug traffickers.

31 Carlton Deposition, ibid., p. 147.

32 Gorman, Part 2, p. SI.

33 Gregorie, Part 4, p. 169.

34 Gorman, Part 2, p. 33.

34

Finally, economic conditions, in Colombia demand U.S. govern-
ment attention. The cartels' stature and power Has been strength-
ened by their, offer to pay off the governments: $10 billion external
debt, and by pumping billions of dollars .into the depressed Colom-
bian economy. U.S. efforts could offset the cartel's position by
working with members of the Colombian government on debt relief
solutions and long term economic development schemes. As in so
many Central and South American nations, deteriorating economic
conditions foster opportunities for subversion of democratic institu-
tions and policies. ■ -~

Page Left Intentionally Blank

(35)

36

NARCOTICS TRAFFICKERS AND THE CONTRAS
L Introduction

The initial Committee investigation into the international drug
trade, which began in April, 1986,. focused on allegations that Sena-
tor John F. Kerry had received of illegal gun-running and narcotics
trafficking associated with the Contra war against Nicaragua.

As the Committee proceeded with its investigation, significant in-
formation began surfacing concerning the operations of interna-
tional narcotics traffickers, particularly relating to the Colombian-
based cocaine cartels. As a result, the decision was made to incor-
porate the Contra-related allegations into a broader investigation
concerning the relationship between foreign policy, narcotics traf-
ficking and law enforcement.

While the contra/drug question was not the primary focus of the
investigation, .the Subcommittee uncovered considerable evidence
relating to the Contra network which substantiated many of the
initial allegations laid out before the Committee in the Spring of
1986. On the basis of this evidence, it is clear that individuals who
provided support for the Contras were involved in drug trafficking,
the supply network of the Contras was used by drug trafficking or-
ganizations, and elements of the Contras themselves knowingly re-
ceived financial and material assistance from drug traffickers. In
each case, one or another agency of the U.S. government had infor-
mation regarding the involvement either while it was occurring, or
immediately thereafter.

The Subcommittee found that the Contra drug links included:

—Involvement in narcotics trafficking by individuals associated
with the Contra movement.

— Participation of narcotics traffickers in Contra supply oper-
ations through business relationships with Contra organiza-
tions.

—Provision of assistance to the Contras by narcotics traffickers,
including cash, weapons, planes, pilots, air supply services and
other materials, on a voluntary basis by the traffickers.
—Payments to drug traffickers by the U.S. State Department of
funds authorized by the Congress for humanitarian assistance
to the Contras, in some cases after the traffickers had been in-
dicted by federal law enforcement agencies on drug charges, in
others while traffickers were under active investigation by
these same agencies.
These activities were carried out in connection with Contra ac-
tivities in both Costa Rica and Honduras.

The Subcommittee found that the links that were forged between
the Contras and the drug traffickers were primarily pragmatic,
rather than ideological. The drug traffickers, who had significant
financial and material resources, needed the cover of legitimate ac-
tivity for their criminal enterprises. A trafficker like George Mo-
rales hoped to have his drug indictment dropped in return for his
financial and material support of the Contras. Others, in the words
of Marcos Aguado, Eden Pastora's air force chief:

37

. . . took advantage of the anti-communist_ sentiment
which existed in Central America ... and they undoubt-
edly used it for drug trafficking. 1

While for some Contras, it was a matter of survival, for the traf-
fickers it was just another business deal to promote and protect
their own operations.

n. The Executive Branch Response to Contra/Drug Charges

In the wake of press accounts concerning links between the Con-
tras and drug traffickers, beginning December, 1985 with a story
by the Associated Press, both Houses of the Congress began to raise
questions aDo$t the drug-related allegations associated with the
Contras, causing a review in the spring of 1986 of the allegations
by the State Department, in conjunction with the Justice Depart-
ment and relevant U.S, intelligence agencies.

Following that review, the State Department told the Congress
in April, 1986 that it had at that , time "evidence of a limited
number of incidents in which known drug traffickers tried to estab-
lish connections with Nicaraguan resistance groups."

According to the Department, ". . . these attempts for the most
part took place during the period wheri the resistance was receiv-
ing no U.S. funding and was particularly hard pressed for financial
support." The report acknowledged that, . . drug traffickers
were attempting to exploit the desperate conditions," in which the
Contras found themselves. 2 The Department had suggested that
while "individual members" of the Contra movement might have
been involved, their drug trafficking was ". . . without the authori-
zation of resistance leaders." 3

Following further press reports linking contra supply operations
to narcotics, and inquiries from the Foreign Relations Committee
to the State Department concerning these links, the State Depart-
ment issued a second statement to the Congress concerning the al-
legations on July 24, 1986.

In this report, the State Department said, ". . . the available evi-
dence points to involvement with drug traffickers by a limited
number of persons having various kinds of affiliations with, or po-
litical sympathies for, the resistance groups." 4

A year later, in August 1987, the CIA's Central American Task
Force Chief became the first U.S. official to revise that assessment
to suggest instead that the links between Contras on the Southern
Front in Costa Rica to narcotics trafficking was in fact far broader
than that acknowledged by the State Department in 1986.

Appearings before the Iran-Contra Committees, the CIA Central
American Task Force chief testified:

1 Subcommittee deposition of Marcos Aguado, Part 3, p. 285.

2 "Allegations of Misconduct by the Nicaraguan Democratic Resistance," State Department
document #3079e, April 16, 1986.

3 State Department document 3079c.

" Allegations of Drug trafficking and the Nicaraguan Democratic Resistance, State Depart
ment document # 5136c, July 26, 1986."

With respect to (drug trafficking by) the Resistance
forces . . . it is not a couple of people. It is a 7 lot of
people. 5

The CIA's Chief of the Central American Task Force went on to
say;

We knew that everybody around Pastora was involved in '
cocaine . His staff and friends (redacted) they were
drug smugglers or involved in drug smuggling. 6

Xhe Justice Department was slow to respond to the allegations
regarding hgks between drug traffickers and the Contras. In [the
spring of 1986, even after the State Department was;acWledgni|
r™L We $ ^^x^S 1 £ rug Mafficking in association with
Contra activities on the Southern Front, the Justice^epartment
was adamantly denying that there' was any substance to the nar-
cotics allegations. At the time, the £BI had'signiflcaht informa§0n
regardmg the involvement of narcotics traffickers in Contra oper-
ations and Neutrahty Act violations. 7 V - .

The failure of U.S. law enforcement 1 and Intelligence agencies to
respond properly to allegations concerning crimSkl aetivW relat-
™g to the Contras was demonstrated : by the handling of the Com-
mittee s own mvestagation by 'the Justice Department and the CIA-
m tne spring or 1986.

On -May 6, 1986 a bipartisan group of Committee staff met with
representatives of the Justice Department,; FBI, DEA, CIA and
State Department to discuss the allegations that Senator Kerry
had received ^formation of Neutrality Act violations, gun running

™ rt^^jf^S? / ?- aS S xa f t ?? ^th Contra organizations based
on the Southern Front in Costa Rica. - - ,

e j£. ^ days, leading -up- to the meeting,. Justice Department
spokesmen were stating publicly that "the -FBI had conducted an
mquiry mto all of these charges and none of them have any sub-
stance « At that meeting, Justice Department officials privately
contradicted the numerous public statements from the Department
that these allegations had been investigated thoroughly and were
determined to bj without foundation. The Justice Department offi-
cials at the meeting said the public statements by Justice were "in-
^1 i 1 ? 6 J^tice o ffici?ls confirmed l^ereWere^ongoiSg
Neutrality. Act mvestigations m connection with the allegations
raised by Senator Kerry. B u&

S^^PS 86 ?^ 68 of ihe CIA- categorically
3 ^ i the Neutrahty Act violations raised by the Committed
staff had in fact taken place, citing classified documents which the

STtSt ^'T^^^^i^^ 00 ^^' fa <& at the time,
the bBl had already assembled substantial information confirming

lSaSga:" 0011 ^ t6Stim0ny ° f Central American Task Force Chief, August 5, 1987, 100-11, pp.

1 oo^ r ^" Ct l ri T^ d ?g osition of C^fral American Task Force Chief, Appendix B Val <? ™ noi
1230 Also North Diary page Q1704, March 26,- 1984, "Pastora reveale^Sg dealer " W ' '
7 See extensive FBI investigative materials released in discovery k^^v S ; a tto

fe m D i9» 6 1988; d0CUIDenting .

**** ^ ThhlSB ™*y M986, : BillBuzenberg; New York Times,

0 Memcoms of May 6, 1986 meeting, Subcommittee files.

39

the Neutrality Act violations, including admissions by some of the
persons involved indickting that crimes had taken place. 10

In August 1986, Senator Richard Lugar, then-Chairman of the
Committee and the ! ranking member/ Senator Claiborne Pell, wrote
the Justice Department "requesting information on 27 individuals
and organizations associated with the contras concerning allega-
tions of their involvement in narcotics trafficking and illegal gun-
running. The Justice Department refused to provide any informa-
tion hi response to this, request, on the grounds that the informa-
tion remained under active investigation, and that the Committee's
"rambling through open investigations gravely risks compromising
those efforts." 11

On October 5, 1988, the Subcommittee received sworn testimony
from the Miami prosecutor handling the Neutrality and gun-run-
ning cases that he had been advised that some officials in the Jus-
tice Department had met in 1986 to discuss how "to undermine"
Senator Kerry's attempts to have hearings regarding the allega-
tions. 12

. The Subcommittee took a number of depositions of Justice De-
partment personnel involved in responding to the Committee inves-
tigation or in prosecuting allegations stemming from the Commits
tee's investigation. Each denied participating in any agreement to
obstruct or interfere with a Congressional investigation. In order to
place in their proper perspective the attempts to interfere with, or
undermine, the Committee investigation, a lengthy "chronology has
been prepared which appears at appendix A of this, report.

IE. The Guns and Drug Smuggling Infrastructure Develops

Covert war, insurgency and drug trafficking frequently go hand-
in-hand without regard to ideology or sponsorship. General Paul
Gorman, testified that the use of narcotics profits by armed resist-
ance groups was coinmmonplace. Gorman stated further that: "If
you want to move arms or munitions in Latin America, the estab-
lished networks are owned by the cartels. It has lent itself to the
purposes of terrorists* of saboteurs, of spies, of insurgents and sub-
versions." 13

DEA Assistant Administrator David Westrate said of the Nicara-
guan war:

It is true that people on both sides of the equation (in
the Nicaraguan war) were drug traffickers, and a couple of
them were pretty signficant. 14

Drug trafficking associated with revolution in Nicaragua began
during the late 1970's with the Sandinistas attempt to overthrow
the regime of Anastasio Somoza Dehayle. At the time, the Sandi-
nistas were supported by most governments in the region. Those

10 Winer MemCom, 5/6/86; Messick MemCom, 5/6/86; Marum Memcom; 5/6/86, Committee
Piles; see Iran/Contra Deposition of FBI Agent Kevin Currier, Appendix B, Vol 8 pp. 205-206

11 Foreign Relations Committee-Justice Department correspondence, August 10 1985

1Z Subcommittee testimony of Jeffery B. Feldman, October 5, 1988, p. 24; Feldman MemCom
November 17, 1987.

1 a Subcommittee testimony of General Paul Gorman, Part 2, February 8, 1988 p. 44.
14 Subcommittee testimony of David Westratem, Part 4, July 12, 1988, p. 144.

40

governments helped provide the FSLN with the money, weapons
and the sanctuary they needed to overthrow Somoza. 15 '

Costa Rica, which has dozens of unsupervised airstrips hear the
Nicaraguan border, became an important supply and staging area
for the Sandinistas. These air strips were used by Noriega and
others for shipments of weapons to the Sandinistas. 16

Former senior Costa Rican Law enforcement officials told the
Subcommittee they were instructed to keep their narcotics investi-
gators away from the Nicaraguan border during the Sandinista
revolution. Even when they had received hard information about
drugs on the aircraft delivering weapons, the officials, in effort to
avoid controvery regarding the . war, ignored the tips and let tne
flights go. 17

A number of Costa, Ricans became suppliers for the Sandinistas
These included Jaime "Pillique" Guerra, who owned a crop dusting
service and a related aircraft support business in northern Costa
Rica. Guerra refueled and repaired the planes which came from
Panama loaded with Cuban weapons for the Sandinistas. 18 Guer-
ra s crop dusting business was excellent cover for the movement of
aviation, .fuel to the dozens of remote airstrips they used without
arousing the suspicions of Costa Rican authorities.

When the Sandinista insurgency succeeded- in 1979, smuggling
activity in northern Costa Rica did not stop. Surplus weapons orig?
nally stored in, Costa Rica for use by the Sandinistas were sold on
the black market in the region; 1 some of these weapons were •
snipped to the Salvadoran rebels from the same airstrips in the
same planes, flown by the same pilots who had previously worked
for the Sandinistas. 20

Costa Rican law enforcement authorizes said that the drug traf-
ficking through northern Costa Rica continued as well. They said
that their police units lacked the men, the communications equip-
ment and the transport to close down the airstrips and seize weap-
ons and drugs. 21

Werner Lotz, a Costa Rican pilot serving sentence for drug smug-
gling, testified that there was little the Costa ftican government
could do to deal with the continuing drug trafficking:

"Costa Rica has got only civil guards, underpaid and
easily bought ... To be very clear ... our guard down
there is barefoot, and you're talking about 50 men to cover
400 kilometers maybe."' 22

"Interviews conducted by Senator John F-. Kerry with current and former Costa Rican law-
enforcement officials, San Jose, Costa Rica, October 31, 1987.

18 Subcommittee testimony of Jose Blanddn, Part 2, February 9, 1988 pp 138-139
"Kerry interviews in Costa Rica, op. cit.

"Subcommittee closed session with Werner Lotz, Part 4, April 8, 1988, p. 673; Elandon testi-
mony, Part 2, p. 86; see also Carlton, Part 2, p. 196 ^u"n tesn

A^OAim 0 "^' ?art ' VP ' 311(1 Subcommittee testimony of Frances J. McNeil, Part 3,

i^^fel^'fo^^^ ^ 3 ' P " 55 ' testimony of

21 Kerry interviews in Costa Rica, ibid.

22 Lotz testimony, op.' cit., p. 690.

41

IV. Drug Trafficking and the Covert War

When the Southern Front against the Sandinista Government in
Nicaragua was established in 1983, Costa Rica remained ill-
equipped to deal with the threat posed by the Colombian drug car-
tels. Then, as now, the country does not have a military, its law
enforcement resources remain limited, and its radar system still so
poor that Contra supply planes could fly in and out of the clandes-
tine strips without being detected. 23

Following their work on behalf of the Sandinistas and the Salva-
doran rebels, the Colombian and Panamanian drug operatives were
well positioned to exploit the infrastructure now serving and sup-
plying the Contra Southern Front. This infrastructure was increas-
ingly important to the drug traffickers, as this was the very period
in which the cocaine trade to the U.S. from Latin America was
growing exponentially.

In the words of Karol Prado, an officer of the ARDE Contra orga-
nization of Eden Pastora on the Southern Front, "drug traffickers
. . . approaches political groups like ARDE trying to make deals
that would somehow camouflage or cover up their activities."

The head of the Costa Rican "air force" and personal pilot to two
Costa Rican presidents, Werner Lotz, explained the involvement of
drug traffickers with the Contras in the early days of the establish-
ment of the Southern Front as a consequence of the Contras lack of
resources: r

"There was no money. There were too many leaders and too few
people to follow them, and everybody was trying to make monev as
best they could." 24

The logic of having drug money pay for the pressing needs of the
Contras appealed to a number of people who became involved in
the covert war. Indeed, senior U.S. policy makers were not immune
tp the idea that drug money was a perfect solution to the Contra's
funding problems.

As DEA officials testified last July before the House Judiciary
Subcommittee on Crime, Lt. Col. Oliver North suggested to the
DEA in June 1985 that $1.5 million in drug money carried aboard
a plane piloted by DEA informant Barry Seal and generated in a
sting of the Medellin Cartel and Sandinista officials, be provided to
the Contras. 25 - While the suggestion was rejected by the DEA, the
fact that it was made highlights the potential appeal of drug prof-
its for persons engaged in covert activity.

Lotz said that Contra operations on the Southern Front Were in-
fact funded by drug operations. He testified that weapons for the
Contras came from Panama on. small planes carrying mixed loads
which included drugs. The pilots unloaded the weapons, refueled,
and headed north toward the U.S. with drugs. 26 The pilots includ-
ed Americans, Panamanians, and Colombians, and occasionally,
uniformed members of the Panamanian Defense Forces. 27 Drug

23 Lotz, Part 4, p. 690.

24 Lotz, Part 4, p. 678.

26 DEA Testimony before House Subcommittee on Crime, July 28, 1988.

26 Ibid., pp. 683-684.

27 Ibid., pp. 680, 682.

42

pilots soon began to use the Contra airstrips to refuel even when
there were no weapons to unload. They knew that the authorities
would not check. the airstrips because the -war was "protected" 28
The problem of, drug traffickers using >£he airstrips also used* to
supply the ^ Contras persisted through . 1985 and 1986 By the
summer of 1986, it became of significant concern to the U S Gov-
ernment officials ^hp were involved in the covert Contra supplv
operatic^ un^derta^n du™. the Boland Amendment period As
then-CIA Station Chief, "Thomas Castillo" testified to the Iran/
Contra Committees, U.S. Ambassador to Costa Rica Lewis Tambs
wanted to place guards on the secret Contra supply airstrip at
Santa Elena ui Costa Rica, to avoid:

having drug traffickers use that site, and this was a con-
tinuing concern during the period of June, July and
August. 29 J

The concern highlights the degree to which the infrastructure
used by the Contras and that used by drug traffickers was poten-
tially uiterchangable, even in a situation in which the U S govern-
ment had itself established and maintained the airstrip involved.

V. The Pilots

,, P ^ ots ^ ho made combined Contra weapons/drug flights through

the Southern Front included:
— Gerardo Duran, a' Costa Rican pilot in the airplane parts
supply business. Duran flew for a variety of Contra organiza-
tions on the Southern Front, including those affiliated with Al-
fonso Robelo Fernando "El Negro" Chambrro, and Eden Pas-
tora, before U.S. officials insisted that the Contras sever their
ties from Duran because of his involvement with drugs 30
Duran was convicted of narcotics trafficking in Costa Rica 'in
1987 and jailed.

—Gary Wayne Betzner, drug pilot who worked for convicted
smuggler George Morales. Betzner testified that twice in 1984
he flew weapons for the Contras from the U.S. to northern
Costa Rica and returned to the United States with loads of co-
caine. Betzner is presently serving a lengthy prison term for
drug smuggling. 31

— Jose "Chepon" Robelo, the head of UDN-FARN air force on
the Southern front. Robelo turned to narcotics trafficking and
reselling goods provided to the Contras by the U.S. 82

.. VI. U.S. Government Funds and Companies with Dkug

Connections

The State Department selected four companies owned and oper-
ated by .narcotics traffickers to supply humanitarian assistance to
tne Contras. The companies were:

28 Kerry interviews in Costa Rica, ibid.
20 Castillo deposition, ibid., p. 483.

11 Subcommittee testimony of Gary Betzner, Part 3, April 7, 1988, pp. 262-265

oZ^t^A^t^^T^ 0 ^ my u - 1987 ' p - 7: ^ m **° from °™ to

43

— SETCO Air, a company established by Honduran drug traffick-
er Ramon Matta Ballesteros;
— DIACSA, , a Miami-based air company operated as the head-
quarters of a drug trafficker enterprise for convicted drug traf-
fickers Floyd Carlton and Alfredo Caballerd;
— FrigorifLcos &e Puntaremas, a firm owned and operated by

Cuban-American drug traffickers;
—Vortex, an air service and supply company partly owned by ad-
mitted drug trafficker Michael Palmer.
In each case; prior to the time that the State Department en-
tered into contracts with the company, federal law enforcement
had received information that the individuals controlling these
companies were involved in narcotics.

Officials at NHAO told GAO investigators that all the supply
contractors were to have been' screened by U.S. intelligence and
law enforcement agencies prior to their receiving funds from State
Department on behalf of the Contras to insure that they were not
involved with criminal activity. 33 Neither the GAO nor the NHAO
were certain whether or not that had actually been done. 34

The payments made by the State Department to these four com-
panies between January and August 1986, were as follows:

|£TCC>i f <> r air transport services'.....:...,:...;.. $185,924.25

JJlAObA, for airplane engine parte i ; 41 120 90

Frigorificos De Punatarenas^as a broker /supplier for various serv-
ices to Qontras on the Southern Front „. 261 932 00

VORTEX, for air transport services 317 425 17

Total 35 : -. ■ - 806,401.20

A number of questions- arise as a result of the selection of these
four companies by the State Department for the provision of hu-
manitarian assistance to the contras, to which the Subcommittee
has been unable to obtain clear answers:
—Who selected these firms to provide services to the Contras,
■ paid for with public funds, and what criteria were used for se-
lecting them? •
—Were any U.S. officials in the CIA, NSC, or State Department
aware of the narcotics allegations associated with any of these
companies? If; so, why were these firms permitted to receive
public funds on behalf of the Contras?
— Why were. Contra suppliers not checked against federal law en-
forcement records that would have shown them to be either
under active investigation as drug traffickers, or in the case of
DIASCA, actually under indictment?
Ambassador Robert Duemling, Director of the Nicaraguan -Hu- -
manitarian Assistance Organization (NHAO), who was responsible
for the operation of the program, was unable to recall how these
companies were selected, when questioned by Senator Kerry in
April, 1988. 36 Ambassador Duemling also could not recall whether

33 Subcommittee interviews with GAO analysts, September 28, 1988.

a 3a -i S ? b fS m J mittee interviews with GAO analysts, ibid.; interviews with Ambassador Duemling
April 6, 1988,

™ Source for Payments to Suppliers: GAO Analysis of NHAO Accounts; final figures provided
by Department of State to the Subcommittee on Narcotics, Terrorism and International Ooer-
abons, January 4. 1989. " v

3 " Duemling statement to Senator Kerry, April 6, 1988.

44

or not the contractors had in fact been checked against law en-
forcement records prior to receiving funds from the State Depart
SSI kP^ 0 ^ testimony before : the Iran/Contra. Committees,
^nbassador Duemlmg had recalled , that NHAO had been directed
by Lt. Col. Oliver North continue "the existing arrangements of
the resistance, movement" in choosing contractors 37

At best, these incidents represent negligence on the part of US
government officials responsible for providing support to the Con-
tras. At worst it was a matter of turning a blind eye^to the activi-
ties of companies who use legitimate activities as a cover for their
narcotics trafficking. , . . . y -

a. setco/hondu carib

n^fHf b ^? Q A S l n by ^ e State Department to transport goods <
on behalf of the Contras from late 1985 through mid-1986 SETCO
had a long-standing relationship with; the largest of the Contra
groups,, the Honduras-based FDN. -Begmiring in. 1984, SETCO was
the principal company used by the Contras in Honduras to trans-
port supplies and personnel for the FDN, carrying at least a mil-
lion rounds- of ammunition, food, uniforms and other military sup-
plies for the^Conteas from 1983 through 1985. According to teltW
clw °sWrn ^/^^^^mittees by FDN leader Adolfo
Calero, SETCO received funds for Contra supply operations from
the contra accounts established by Oliver Korth ^

TLS. law enforcement records state that.SETCO was established
A^niQRS^ ™ e i* er Matta Ballesteros, whose'

April 1988 extradition from Honduras to the United States in con-
nection with drug trafficking charges caused riots outside the U S
Embassy m Tegucigalpa. .

«WTPnT Pl ^ f 19 v S Patens Investigative Report states that
.&JilCO stands for Services Ejectutivos Turistas Commander and
is headed by Juan Ramon Mata Ballestros, a class I DEA violator "

SirSm Sta *v tha ^ accordi *S t0 Drug Enforcement
Agency, SETCO aviation; is a corporation formed by American
businessmen who are dealing with Matta and are smuggling nar-
cotics into the United States." 39 6S ^

FT^ e f5 ^P^ ots:se ^ missions for the

FDN for SETCO was Frank Moss, who has been under investiga-
tion as an alleged drug trafficker since 1979. Moss has been investi-
gated, although never indicted; for narcotics offenses by ten differ-
ent law enforcement agencies. 40 •

In addition to flying Contra supply missions through SETCO •
Moss formed his own company in 1985, Hondu Carib, which also ^
flew supplies to the Contras, including weapons and ammunition
purchased from R M. Equipment, an arms company controlled by
Ronald Martm and James McCoy. 41 y

11 5 raD T - Con ^ a deposition of Robert Duemling, Appendix B, Volume 9, pp 47-78
It ttS ^f^t^testimony of Adolfo Calero, Appendix Volume 3 p 176

#^&^s^s^^ss^ v ^^ Penilton 0wen - et N90201 " m °

*° Subcommittee interview with Sheriff of Port Charlotte County, Florida, May 1987

45 .

The FDN's arrangement with Moss and Hondu Carib was pursu-
ant to a commercial agreement between the FDN's chief supply of-
ficer, Mario Calero, and Moss, under which Calero was to receive
an ownership interest in Moss' company. The Subcommittee re-
ceived documentation that one Moss plane, a DC-4, N90201, -was
used, to move Contra goods from the United States to Honduras. 42
On the basis of information alleging, that the plane was being used
for drug smuggling, the Customs Service obtained a court order to
place a concealed transponder on the plane. 43

A second DC-4 controlled by Moss was chased off the west coast
of Florida by the Customs Service while it was dumping what ap-
peared to be a load of, drugs, according to law enforcement person-
nel. When the plane landed at Port Charlotte no drugs were, found
on board, but the plane's registration was not in order and its last
known owners were drug traffickers. Law enforcement personnel
also found,, an address book aboard the plane, containing among
other references the telephone numbers of some Contra officials
and the Virginia telephone number of Robert Owen, Oliver North's
courier. 44 A law enforcement inspection of the plane revealed the
presence of significant marijuana residue. 45 . DEA seized the air-
craft on March 16, 1987.

B. FRIGORD7ICOS DE PUNTEEElsTNAS

FrigorifLcos de Punterennas is a Costa Rican seafood company
which was created as a cover for the laundering of drug money, ac-
cording to grand jury testimony by-one of its partners, and testimo-
ny by Ramon Milian Rodriguez, the convicted money launderer
who established the company. 46

From its creation, it was operated and owned by Luis Rodriguez
of Miami, Florida, and Carlos Soto and Ubaldo Fernandez, two con-
victed drug traffickers, to launder drug. money 47 Luis Rodriguez,
who according to Massachusetts law enforcement officials directed
the largest marijuana smuggling ring in the history of the state
was indicted on drug trafficking charges by the federal government
on September 30, 1987 and on tax evasion in connection with the
laundering of money through Ocean Hunter on April 5, 1988 48

Luis Rodriguez controlled the bank account held in the name of
Fngorificos which received $261,937 in humanitarian assistance
funds from the State Department in 1986. Rodriguez signed most of
the orders to transfer the funds for the Contras out of that ac-

innS^S^ 1 ?- 6 De £f^£s Shipper's Export Declaration for H/M Equipment, Inc., file
# 0003688, Miami, Honda, February 28, 1985.
* 3 Customs report, NOGGGGGBDO300036, ibid., p. 13.

4 t ^ ress book siezed by Customs, Port "Charlotte, Florida, N2551, March 16 1987

Subcommittee staff interview with Sheriffs investigators. Port Charlotte County, Florida

*6Qrand jury statements of Soto 0H m& ^ a& y _ RodrigueZi 99.0222, USDC, Northern

District of Florida, September 29, 1987, and Subcommittee testimony of Ramon Milian-Eodri-
fSda^af FehrW U ' 1988, PP " 26ft " 261: document s seized in U.S. v: Milian RodHgu^SI)

4 *Ibid.

rra ^ 4"^ 87-fll044, US District Court for the Northern District of Florida-

US v. Luv Rodriguez, 88-0222 CE-King, U.S. District Court for the Southern District of

4o

count. 49 Rodriguez was also president of Ocean Hunter, an Ameri-
can seafood company created for. him by Ramon Milian Rodri-
guez. 50 Ocean Hunter imported seafood it bought from Frigorificos
and used the intercompany transactions to launder drug money. 51
In statements before a Florida federal grand jury in connection
with a narcotics trafficking prosecution of Luis Rodriguez, Soto tes-
tified that he knew Luis Rodriguez as a narcotics trafficker who
had been smuggling drugs into the U.S., since 1979. Soto also testi-
fied that they were partners in the shipment of 35,000 pounds of
marijuana to Massachusetts in 1982. 52

Milian-Rodriguez told Federal authorities about Luis Rodriguez ;
narcotics trafficking prior to Milian-Rodriguez' arrest in May 1983
In March and April 1984, IRS agents interviewed Luis Rodriguez
regarding Ocean Hunter, drug trafficking and money laundering, ,
and he took the Fifth Amendment in response to every question 53
In September, 1984, Miami police officials advised the FBI of infor-
mation they had received that Ocean Hunter was funding contra
activities through "narcotics transactions," and nothing that Luis
Rodriguez was its president. This information confirmed previous
accounts the FBI ; had received concerning the involvement of
Ocean Hunter and: its officers in. Contra supply operations involv-
ing the Cuban American community. 54

Despite the information possessed by the FBI, Customs and other
law enforcement agencies documenting Luis Rodriguez' involve-
ment.in narcotics trafficking and money laundering, the State De-
partment used Frigorificos, -which he owned and operated, to deliv-.
er humanitarian assistance funds to the Contras in late 1985. Offi-
cial funds for the Contras from the United States began to be de-
posited into the Frigorificos account in early 1986, and continued
until mid-1986. 55 .

In May . 1986, Senator Kerry , .advised the Justice Department
Drug Enforcement Agency, State Department,. NHAO and CIA of
allegations he had received involving Luis Rodriguez and his com-
panies in drug trafficking and mohe;y laundering: In August 1986,
the Foreign Relations.,Committee asked Justice whether the allega-
tions about Luis Rodriguez were true, and requested documents to
determine whether the State Department might have in fact pro-
vided funds to a company controlled by drug traffickers. Justice re-
fused to answer the inquiry.

The indictment of Luis Rodriguez on drug charges 18 months
later demonstrated that the concerns raised ;by Senator Kerry to
the Justice Department and other agencies in May 1986 concerning
his companies were well founded, as the State Department had in

40 Banking records of Frigorificos de Puntarenas subpoenaed by House Foreign Affairs Sub-
committee on the Western Hemisphere, May 1986; GAO Analysis'" NHAO Expenditures, May

50 Corporate Records, Florida Secretary of State, Ocean Hunter, Inc.

51 Grand jury statements of Soto, ibid., Ramon Milian-Rodriguez ibid

Documents on file in U.S. v. Rodriguez, 99-0222, USDC, Northern. District of Florida 1988
from grand jury statements of Carlos Soto. '

53 Documents on file, in U.S.M. Luis Rodriguez, ibid., Northern District of Florida.
- 5 r r £ BI ^ Continental Bank Bombing, FBI Agent Gedrge Kiszynski, MM174A-1298, released
in U.S. .u. Corbo, Southern District of Florida, 1988.

t " GA J? Alu ??P^? JB &9 Payments, Western Hemisphere Subcommittee of House Foreign
Affairs Committee, May 1986; banking records subpoenaed by Western Hemisphere Subcommit-
tee.

47

fact chosen companies operated by drug traffickers to supply the
Contras. 56

C. DIACSA

DIACSA was an aircraft dealership and parts supply company
partly owned by the Guerra family of Costa Rica. DIACSA's presi-
dent, Alfredo Caballero, was under DEA investigation for cocaine
trafficking and money laundering when the State Department
chose the company to be an NHAO supplier. Caballero was at that
time a business associate of Floyd Carlton — the pilot who flew' co-
caine for Panama's General Noriega.

In an affidavit filed in federal court in January, 1985, DEA Spe-
cial Agent Daniel E. Moritz described working as an undercover
money launderer "for the purpose of introducing myself into a
criminal organization involved in importing substantial quantities
of cocaine into the United States from South America. 57 That orga-
nization was the Carlton/Caballaro partnership. According to
Agent Moritz, the cocaine traffickers used DIACSA offices "as a lo-
cation for planning smuggling ventures, for assembling and distrib-
uting large cash proceeds, of narcotics transactions, and for placing
telephone calls in furtherance of the smuggling ventures." 58

From March 1985 until January 1986, Moritz received approxi-
mately $3.8 million in U.S. currency from members of this organi-
zation "to be distributed, primarily in the form of wire transfers
around the world." Most of the $3.8 million was delivered in DIAC-
SA's offices.

Moritz met both. Alfredo Caballero and Floyd Carlton in March
of 1985. Moritz had previously learned from a confidential inform-
ant that Carlton was a "major cocaine trafficker from Panama who
frequented DIACSA and was a close associate of Alfredo Caballe-
ro." The informant added that "Caballero provided aircraft for
Floyd Carlton Caceres' cocaine smuggling ventures" and that Ca-
ballero allowed Carlton and "members of his organization to use
DIACSA offices as a location for planning smuggling ventures, for
assembling and distributing large cash proceeds of narcotics trans-
actions and for placing telephone calls in furtherance of the smug-
gling ventures." Alfredo Caballero was described by the informant
"as the man in charge of operations for Floyd Carlton Caceres' co-
caine transportation organization." 59

Other members of the group were Miguel Alemany-Soto, who re-
cruited pilots and selected aircraft and landing strips, and Cecilia
Saenz-Barria ; . The confidential informant said that Saenz was a
Panamanian "in charge of supervising the landing and "refueling" 6f
the organization's aircraft at airstrips on the Panama/Costa Rica
border" and that he "arranges for bribe payments for certain Costa
Rican officials to ensure -the protection of these aircraft as they
head north loaded with cocaine." 60

SB U.S. v, Luis Rodriguez, ibid, Northern District of Florida; GAO analysis of NHAO pay-
ments.

51 Affidavit of Daniel E. Moritz, Special Agent for the DEA January 1985, U.S. v. Carleton et
al, SD Florida, 85-70.
58 Ibid.

Efl Moritz Affidavit, pp. 3-4, ibid.
60 Ibid.

48

During 1984 and 1985, the principal Contra organization, the
fDN, chose DIACSA for "intra-account transfers." The laundering
of money through DIACSA concealed the fact that some funds for
the Contras were through deposits arranged by Lt. Col. Oliver
North. 61

The indictments of Carlton, Caballero and five other defendants,
including Alfred Caballero's son Luis, were handed down on Janu-
ary 23, 1985. The indictment charged the defendants with bringing
into the United States on or about September 23, 1985, 900 pounds
of cocaine. In addition, the indictment charged the defendants with
laundering $2.6 million between March 25, 1985 and January 13,
1986. 62

Despite the indictments, the State Department made payments
on May 14, 1986 and September 3, 1986, totaling $41,120.90 to
DIACSA to provide services to the Contras. 63

In addition, the State Department was still doing business with
DIACSA on its own behalf six months after the company's princi-
pals had been indicted. Court papers filed in the case in July 1986,
show that the U.S. Embassies of Panama and Costa Rica were cli-
ents of DIACSA. While DIACSA and its principals were engaged in
plea bargaining negotiations with the Justice Department regard-
ing the cocaine trafficking and money laundering charges, U.S.
Embassy personnel in Panama and Costa Rica were meeting with
one of the defendants to discuss purchasing Cessna planes from the
company. 64

Each of the defendants in the DIACSA case was ultimately con-
victed on charges of importing cocaine into the- United States. The
sentences they received ranged from ten years for one non-cooper-
ating defendant, to nine years for Floyd Carlton, to three years pro-
bation for Luis Caballero and five years probation for his father,
DIACSA's owner, Alfredo Caballero, as a consequence of their coop-
eration with the government. 65

D. VORTEX

When the State Department signed a contract with Vortex to
handle Contra supplies, Michael B. Palmer, then the company's Ex-
ecutive Vice-President signed for' Vortex. At the time, Palmer was
under active investigation by the FBrin three jurisdictions in con-
nection with his decade-long activity as a drug smuggler, and a fed-
eral grand jury was preparing to indict him in Detroit. 66
-'The contract required Vortex to receive; goods for the. Contras,
store, pack, and inventory them. At £he time the contract was
signed, Vortex's principal assets were two airplanes which Palmer 1
previously used for drug,smuggling. 67

* l See Iran-Contra testimony of Adolfo Calero, Appendix B, Volume S, p. 176.

62 U.S. v. Carlton, et al„ U.S. District Court, Southern District of Florida, January 2S, 1986.

fi3 GAO Analysis, NHAO Accounts, provided to Subcommittee, September, 1988.-

E * Motion For Permission to Travel, U.S. v. Caballero, SD Florida, 86-70-CR,- July 16, 1986

65 Court record, U.S. v. Carlton-Caceres, et al. SD Florida 86-070.

m di c tment, U.S. v. Palmer, Detroit U.S. Attorney's Office, 1986;. Subcommittee testimony of
Michael B. Palmer, Part S, April 6, 1988, pp. 208-213.

87 Palmer, Part 2, p. 205 and Palmer Subcommittee Deposition, April 5, 1988, pp. 75-79, see
generally Palmer indictment by Detroit U.S. Attorney in June 1986, and documents released as
discovery in US. v. Vogel et aL

49

Vortex was selected by NHAO assistant director Philip Buechler,
following calls among Buechler, Palmer, and Pat Foley, the presi-
dent of Summit Aviation. 68

VII. The Case of Geoege Morales and FRS/ARDE

In 1984, the Contra forces under Eden Pastora were in an in-
creasingly hopeless situation. On May 30, 1984, Pastora was wound-
ed by a bomb at his base camp at La Penca, Nicaragua, close to the
Costa Rica border. That same day, according to ARDE officer Karol
Prado, aid to ARDE from the United States was cut off. 69

Despite continued pressure from the United States, Pastora re-
fused to place his ARDE forces under a unified command with the
largest of the Contra organizations— the Honduras-based FDN. The
CIA considered Pastora to be "disruptive and unpredictable." 70 By
the time the Boland Amendment cut off legal military aid to the
Contras, the CIA had seen to it that Pastora did not receive any
assistance, and his forces were experiencing "desperate condi-
tions." 71

Although there are discrepancies among the parties as to when
the initial meeting took place, Pastora s organization was ap-
proached by George Morales, a Colombian drug trafficker living in
Miami who had been indicted on narcotics trafficking charges.

According to the State Department report to the Congress of
July 26, 1986:

■ Information developed by the intelligence community in-
dicates that a senior member of Eden Pastbra's Sandino
Revolutionary Front (FRS) agreed in late 1984 with (Mo-
rales) that FRS pilots would aid in transporting narcotics
in exchange for financial assistance . \ . the FRS official
agreed to use FRS operational facilities in Costa Rica and
Nicaragua to facilitate transportation of narcotics. (Mo-
rales) agreed to provide financial support to the FRS, in
addition to aircraft and fraining for FRS pilots. After un-
dergoing flight training, the FRS pilots were to continue to
work for the FRS, but would also fly narcotics shipments
from South America to sites in Costa Rica and Nicaragua
for later transport to the United States. Shortly, thereafter
(Morales) reportedly provided the FRS one C-47 aircraft
and two crated helicopters. He is reported to have paid the
sum of $100,000 to the FRS, but there was no information
available on who actually received the money. 72

The State Department said it was aware of only one incident of
drug trafficking resulting from this agreement between the Con-
tras and Morales and that was the case of Contra pilot Gerardo
Duran. Duran was arrested in January 1986, in Costa Rica for his
involvement in transporting cocaine to the United States. 73 Duran

68 Palmer testimony, House Judiciary Subcommittee on Crime, September 23 1988
sa Subcommittee deposition of Karol Prado, Part 3, p. 278, see also Iran/Contra Testimony of
CIA Central American Task Force Chief, August 5, 1987, 100-11, pp. 192-183.

70 Castillo executive session, Iran/Contra Committees, ibid., pp. 9-10.

71 Subcommittee deposition of Octaviano Cesar, San Jose, Costa Rica, October SI 1987 Part 3
pp. 278-281.

72 State Department document # 5136c, p. 5.

73 Ibid.

50

was an FRS pilot from 1982 to 1985 and operated an air taxi serv-
ice in Costa Rica. According to Marco Aguado and Karol Prado,
Duran would fly supplies to the Contras on the Southern Front and
he would charge for each flight. 7 4

Robert Owen, courier for Lt. Col. -Oliver North, testified to the
Iran/Contra Committees that he told North he thought Karol
Prado was involved in trafficking drugs out of Panama, and that
Pastora's pilot, Marco Aguado, was also involved. 7 * The Subcom-
mittee was unable to validate. Owen's claims. Prado vehemently
denied these allegations stating that he believed the drug: .traffick-
ing allegations against Pastora were the result of a CIA effort to
discredit him. 76

Morales testified that his involvement with the Contras started
in 1984 at the urging of Marta Healey, the widow of one of his drug
pilots, Richard Healey. 77 Marta Healey's first husband was Adolfo
"Popo" Chamorro, the second in command, to Eden Pastora in the
FRS. She came from a prominent Nicaraguan family.

At the time of his first contract, Morales was under indictment
for marijuana smuggling. He testified that he thought by assisting
the Contra cause Ms indictment would be dropped. Marta Healey
introduced Morales to Popo Chamorro, Marco Aguado and Octa-
viano Cesar at- a meeting in Miami. According to Morales, he
wanted to make a deal: He would help the Contras with their
needs, and "they in exchange would help me with my objective,
which was solving my indictment." Morales believed the Contra
leaders would help "him solve his legal problems because of their
contacts with the CIA. 78

On October 31, 1987 in San Jose, Costa Rica, the Subcommittee
videotaped the depositions of three Contra leaders with intimate
knowledge of the Morales relationship with Pastora's organization
in video depositions. The three were Karol Prado, Pastora's head of
communications; Marco Aguado, Pastora's air force chief; and Octa-
viano Cesar who* along . with his brother Alfredo, were political
allies of Pastora's at the time. A fourth, Adolfo "Popo" Chamorro,
who was Pastora's second in command in ARDE, testified in closed
.session of the Subcommittee in April 1988. Chamorro's testimony
was taken in closed session by the consent of the Subcommittee at
his request. Dick McCall, of Senator Kerry's personal staff, in an
arrangement worked out with Chamorro and his attorneys, subse-
quently interviewed him in Miami.

Each denied knowing that Morales was under indictment for
drug trafficking when they first met him at Marta Healey's house
in Miami. Popo Chamorro said that as far as he knew Morales was
just another rich Miami resident with strong anti-Communist feel-
ings. 79

In addition, all three denied receiving more than $10,000 in cash"
from Morales. The Subcommittee found that $10,000 was given to
Popo Chamorro to cover the cost of transporting a C-47 owned by

7 * Subcommittee testimony of Marco Aguado and Karol Prado, Part 3, p. 285.
76 Iran-Contra testimony of Robert Owen, Appendix B, Volume 20, pp. 849-850.
76 Deposition of Karol Prado, ibid., p. 285.

™ Subcommittee testimony of George Morales, Part 3, April 7, 1988, p. 297.
™ Ibid., p. 300.

76 Closed session testimony of Adolfo "Popo" Chamorro, April 6, 1988, p. 13.

51

Morales, which he donated to ARDE, from Haiti to Ilopango Air
Force Base in El Salvador. 80

While denying receiving funds personally, Prado, Aguado and
Cesar each confirmed elements of Morales' story.

According to Pracloi Octaviano Cesar and his brother Adolfo
allied themselves politically with Pastora in the Summer of 1984. A
decision was then made to send Popo Chamorro and Octaviano
Cesar to the United States to look for funds. 81 In September, Popo
Chamorro returned to Costa Rica with photographs of a DC-4 and
a Howard plane, and told Pastora that they would get six more
planes, including a Navajo Panther from George Morales. 82

Pastora told Chamorro 'k that the C-47 was the most practical
plane for the Contras at the time and Popo returned to Miami to
arrange for its transfer. Chamorro provided the Subcommittee with
an aircraft purchase order, dated October 1, 1984. The notarized
purchase -order provided that for the sum of one dollar, a McDon-
nell-Douglas DC-3, the civilian designation for a C-47, would be
transferred to Marco Aguado. The order was signed by George Mo-
rales, as the seller, and by Marco Aguado, as the purchaser.

In addition, Chamorro, gave the Subcommittee a list of flights
made by that C-47 to ferry arms from Ilopango to Costa Rica and
La Penca. Between October 18, 1984 and February 12, 1986, some
156,000- pounds of material were moved from Ilopango to air fields
in Costa Rica. Of the 24 flights during this period, eleven were to
La Penca oh the Nicaraguan side of the Eiq San Juan. 83

The Subcommittee substantiated key elements of the Morales
story, although it did not find evidence that Cesar, Chamorro, or
Prado were personally involved in drug trafficking. First, all wit-
nesses agreed that Morales jjave ARDE a C-47. Evidence of an as-
sociation between them is also provided by a Customs document.
This document, provided the Committee by the U.S. Customs Serv-
ice, showrs that Morales entered the United States from the Baha-
mas oh October 13, 1984, with Marco Aguado, Octaviano. Cesar and
Popo Chamorro. They carried $400,000 in cash and checks which
were declared by Aguado, Chamorro and Cesar. They claimed that
the checks and money were returned to Morales after clearing Cus-
toms. 84

'Aguado summarized the relationship between the Southern
Front Contras and the drug traffickers in terms of the exploitation
of the Contra movement by individuals involved in narcotics smug-
gling. According to Aguado, the trafficking organizations, "took ad-
vantage of the anti-communist sentiment , which existed in Central
America . . . and they undoubtedly used it for drug trafficking."
Referring to the Contra resupply operations, Aguado said the traf-
fickers used "the same connections, the same air strips, the same
people. And maybe they said that it was weapons for Eden Pastora,
and . it was actually drugs that would later on go to the
U.S. '. . . They fooled people . . . Unfortunately, this kind of ac-

Ibid., p. 15.

81 Testimony of Karol Prado, Part 3, p. 278.

82 Ibid., pp. 278-279.
Chamorro, ibid., pp. 11-12.

s* Depositions of Aguado, Prado and Cesar, Part 3, pp. 277-286 and Chamorro, ibid., pp. 16, 20.

52

tivity, which is for the freeing of a people, .is quite similar to the
activities of the drug traffickers." 85 i

Octaviano Cesar testified that when he dealt with Morales he
was:

T hinkin g in terms of the security of my country. It just
didn't enter my mind that I would become involved in
such a mess; because it never entered into my mind to get
in "that [drug] business ...

I went a couple of times inside in Nicaragua and I- saw
people there. Young kids 15, 16 years old, they were tarry-
ing 30, 40 rounds- of ammunition against the
Sandinistas . . . And that's why I did it. I'm not proud of
it, but I just didn't have any choice. I mean, the U.S. Con-
gress didn't give us any choice. They got these people into .
a war. The people went inside of Nicaragua, 80 miles
inside. They had thousands of supporters, campesinos
there helping them . . . Now, when those people retreat,
those campesinos were murdered by the Sandinistas. I
don't want that, but that's the reality of life. 86

In addition, Cesar told the Subcommittee that he told a CIA offi-
cer about Morales and his offer to help the Contras.

Senator Kerry. Did you have. occasion to say to someone
in the CIA that you were getting money from him and you
were concerned he was a drug dealer? Did you pass that
information on to somebody?

Mr. Cesar. Yes, I passed the information on about the —
not the relations — well, it was the relations "and the air-
planes; yes. And the CIA people at the American military
attache's office that were [sic] based at Hopango also,, and
, ! any person or any plane landed there, they had to go- — -
. Senator Kerry. And they basically said to you , that it
was all right as long as you, don't deal in the powder; is
that correct? Is that a fair quote?

Mr. Cesar. Yes. 87 '

After the La Penca bombing of, May 30, 1984 all assistance was
cut off by the CIA to ARDE, while other Contra groups on both
fronts continued to receive support from ihe U.S. government
through a. variety of channels.. The United States stated that the
cut>off of AEDE was related to the involvement of its personnel in
drug trafficking. Yet many of the same drug traffickers who had
assisted ARDE were also assisting other Contra groups that, contin-
ued to" receive funaong. Morales* for 'example, used Geraldo Duran
as one of his drug pilots, and Duran. worked for .Alfonso Robello
and. Fernando "el" Negro" ChamOrrb, who ' were associated with
other Contra groups, as well as for. ARDE. 88 .

In a sworn deposition which was taken in San Jose Costa Rica by
the Subcommittee on October 31, 1987, Karol Prado, Pastora's
treasurer and procurement officer, vehemently denied allegations

85 Aguado, Part 3, p. 285.
sa Cesar, Part 3, p. 286.
"Ibid., p. 282.

sa See e.g. Letter from Eden Pastora to David Sullivan and Elliott Abrams, Ibid.

53

concerning the personal involvement of ARDE leadership in drug
trafficking. Prado said that because of Pastora's problems with the
U.S. government, it was his belief that the CIA was attempting to
discredit the former Sandinista Coram andante and his supporters
in ARDE with allegations that they were involved in drug traffick-
ing.^

Thomas Castillo, the former CIA station chief in Costa Rica, who
was indicted in connection with the Iran/Contra affair, testified
before the Iran/Contra Committees that when the CIA became
aware of narcotics trafficking by Pastora's supporters arid lieuten-
ants, those individuals' activities were reported to law enforcement
officials. 90 However, Morales continued to work with the Contras
until January 1986. He was indicted for a second time in the
Southern District of Florida for a January 1986 cocaine flight to
Bahamas and was arrested on June 12, 1986.

Morales testified that he offered to cooperate with the govern-
ment soon after he was arrested, and that he was willing to take a
lie detector test. He said his attorneys repeated the offer on his
behalf several times, but on each occasion the U.S. Attorney, Leon
Kelfher, refused. 91

Leon Kellner and Richard Gregorie, then the head of the crimi-
nal division of the Miami U.S. Attorney's office, met with the staff
of the Committee in November 1986. They said that Morales' story
was not credible and that Morales was trying to get his sentence
reduced by cooperating with a Senate committee. As Morales had
not yet been sentenced, both Kellner and Gregorie discouraged the
staff from meeting with Morales at that time, and the staff respect-
ed their request. Kellner and Gregorie said that Morales was like
the many Miami cocaine traffickers who use the "I was working
for the OA" defense.? 2

Following his testimony before the Subcommittee, Morales re-
newed his offer to work with the government. This time, federal
law enforcement officials decided to accept the offer. Morales ^pro-
vided the government with, leads that were used by law enforce-
ment authorities in connection with matters remaining under in-
vestigation. In November 1988, the DEA gave Morales a lengthy
polygraph examination on his testimony before the Subcommittee
arid he was considered truthful. 93

VII. John Hull

John Hull was a central figure in Contra operations on the
Southern Front when they were managed by Oliver North, from
1984 through late 1986. 94 Before that, according to former Costa"

"Subcommittee testimony of Karol Prado, Part 3, p. 385. See North Diary p. Q0450i July 24,
1984. The entry reads: "get Alfredo Cesar on Drugs," see also Iran-Contra declassified executive
session testimony of Thomas Castillo, May 29, 1987, pp. 83-85 and Iran-Contra deposition of
Thomas Castillo, Apondix B, Volume E, pp. 250-252.

00 Iran-Contra declassified executive session of Thomas Castillo, p. 84.

91 Subcommittee testimony of George Morales, Part 1, July 16, 1987, p. 98.

32 David Keany and Andy Semmel of the Senate Foreign Relations Committee staff and Dick
McCall of Senator Kerry's staff, attended the meeting.

33 See correspondence from DEA Administrator to John C. Lawn to Senator John F Kerry
January IS, 1989.

s * North notebook pages Q 0344, 0414, 0415, 0426, 0431, 0543, 0550, 0932, 0955, 0977, 1156,
1159; Iran-Contra Deposition- of Robert W. Owen, May 4, 1987, pp. 6-15 and October 1 1987 pn.
3-34; RWO Exhibit 12, 2/27/86; Iran-Contra testimony, May 14, 1987, p. 818.

54

Rican CIA station chief Thomas Castillo's public testimony, Hull
had helped the CIA with military supply and other operations' on
behalf of the Contras. 93 In addition during the same period Hull
received $10,000 a month from Adolfo Calero of the FDN— at
North's direction. 96

Hull is an Indiana farmer who lives in northern Costa Rica. He
came to Costa Rica in mid-1970's and persuaded a number of North
Americans to invest in ranch land in the northern part of the
country. 97 Using their money and adding some of his own, he pur-
chased thousands of acres of Costa Rican farm land. Properties
under his ownership, management or control ultimately included
at least six airstrips. To the . many pilots and revolutionaries who
passed through the region, this collection of properties and air-
strips became known as John Hull's ranch.

On March 23, 1984, seven men aboard a U.S. government owned
DC-3 were killed when the cargo plane crashed near Hull's ranch,
revealing .publicly that Hull was allowing his property to be used
for airdrops of supplies to the Contras. 98 But even before this
public revelation of Hull's role in supporting the Contras, officials
in a variety of Latin American countries were aware of Hull's ac-
tivities as a liaison between the Contras and the United States gov-
ernment. Jose Blandon testified, for example, that former Costa
Rican Vice President Daniel Oduber suggested he (Blandon) meet
with Hull in 1983, to discuss the formation of a unified southern
Contra , command under Eden Pastora."

Five witnesses testified that Hull was involved in cocaine traf-
ficking: Floyd Carlton, Werner Lotz, Jose Blandon, George Morales,
and Gary Betzner. Betzner was the only witness who testified that
he was actually present to witness -cocaine being loaded onto planes
headed for the United States in Hull's presence.

Lotz said that drugs were flown into Hull's ranch, but that he
did not personally witness the flights. He said he heard about the
drug flights from the Colombian and Panamanian pilots who alleg-
edly flew drugs to Hull's airstrips. Lotz described the strips as "a
stop for refuel basically. The aircraft would land, there would be
fuel waiting for them, and then would depart. They would come in
with weapons and drugs." Lotz said that Hull was paid for allowing
his airstrips to be used as a refueling stop. 100

Two witnesses, Blandon and Carlton recounted an incident in-
volving the disappearance of a shipment of 538 kilos of cocaine
owned by the Pereira or Cali cocaine cartel. Teofilo Watson, a
member of Carlton's smuggling operation, was flying the plane to
Costa Rica for the Cartel. The plane crashed and Watson was
killed. The witnesses believed that the crash occurred at Hull's
ranch and that Hull took the shipment and bulldozed the plane, a
Cesna 310, into the river.

3a Castillo executive session, ibid., p. 59.

Bs Iran-Contra deposition of Robert W. Owen, Appendix B, Vol. 20, pp. 650 802

"Testimony of Louell Hood and Douglas. Siple, Subcommittee on International Economic
Policy, Trade, Oceans and Environment .and Subcommittee on Terrorism, Narcotics and Interna-
tional Operations, October 30, 1987, pp. 160-161. -unema

aa "The CIA Blows an Asset," Newsweek, September 3, 1984, pp. 48-49

00 Subcommittee testimony of Jose Blandon, Part 2, p. 129.

100 Subcommittee deposition of Werner Ldtz, Part 4, April "g, 1988, pp. 681-682 691-696

55

Carlton testified that the Colombians were furious when they dis-
covered the- 'cocaine missing. He said they sent gunmen after Hull
arid in fa'ct kidnapped a member of Hull's : family, to ^force the
return of the cocaine. When that failed they became convinced that
Carlton himself stole the cocaine and they sent gunmen after him,*
The gunmen dug- "up Carlton's property in Panama with a b'ackhoe
looking for the lost cocaine, and Carlton fled for his life to
Miami. 101 ' ■

Gary Betzner started flying for Morales' drug smuggling network
in ,1981. Betzner testified that his first delivery of arms to the-Con-
tras was in 1983, when he flew a. DC-3 carrying grenades and
mines to Jlopango Air Force Base.in El Salvador. His co-pilot on
the trip was Richard. Healey, who had .flown drugs, for Morales. 102

^Betzner said the weapons were unloaded at Uopango by Salvador-
an military personnel and an American whom he assumed worked
for the. U.S. Department of Defense. Betzner testified that he and
Healey flew the plane, on to .Colombia where tney picked up a load
of marijuana and returned to their base at Great Harbor Cay in
the Bahamas. 103 .. . "... '

\ According ,to. betzner, the next . Contra weapons and .drugs flight
took place in July 1984. Morales asked him to fly a load of weapons
to Hull's ranch and to pick up "a load' of drugs. Betzner flew a
Cessna 402-B to John Hull's ranch. -According to Betzner, he was
met at €he, airstrip by Hull, and they watched the cargo of weapons
being unloaded, and cocairje,. packed" in 17 duffel bags, and five or
six two-foot square boxes being loaded into the now-empty Cessna.
Better then- flew the plane to a field at Lakeland, Florida. 10 *

Yet another guns for drugs flight was made two weeks later. On
tliis trip, Betzner said he flew a; Pantner to an airstrip^called '"Los
Llanos/' about ten miles from Hull's properties, and not far from
the Voice of America transmitter' in northern Costa Rica. Betzner
testified that 1 Hull met him again and the two watched while the
weapons were unloaded and approximately 500 kilos of cocaine in
17 duffel bags were loaded~-for 'the return flight to -Florida. 105

Hull became the subject of an investigation by the U.S. Attorney
for the Southern District/ of Florida in the spring of 1985. In late
March 1985, Assistant t£S. Attorney Jeffrey Feldman and two FBI
agents went to 1 Costa Rica to investigate: Neutrality Act violations
by participants in the Contra resupply: network that' were also
under investigation at the -time by Senator Kerry. Both the JTeld-
man and Kerry inquiries had been prompted in part by statements
made to reporters; Jjy soldiers of fortune imprisoned in Costa Rica
who alleged John .Hull was providing; support for the Contras . with -
the help , of the National Security Council. 106

- Zeldman and the FBI agents met,with U.S. Ambassador to Costa
Rica, Lewis Tambs, and. the, CIA thief of Station, Thomas Castillo,

101 Subcommittee testimony of Floyd Carlton, Part 2, pp. 205-507; Subcommittee testimony of
Jose Blandon, Part 2, pp. 115-116.
"a Betzner, Part 3, pp. 253-254, 256.
108 Ibid., pp. 257-258.

10 * Ibid., pp. 262-267; see also Morales testimony, Part 3, pp. 301-304 and DEA polygraph of
Morales.
105 Ibid., pp. 262-267.

}°o Iran-Contra deposition of Jeffrey Feldman, Appendix B, Volume 10, April SO, 1987 pp 77-
78; Statements of Steven Carr and Peter Glibbery to Senate staff, March 8, 1986.

56

who told him John ^ew Rph Owen and Oliver Northland
gave the, impression tl^t Hull had. been working for -U.S. interests
prior to, March of 1-984. In. addition,; one of the- embassy security of-
ficers^ Jim Nagel,. told one. of the -FBI agents accompanying Eejdr
nian, t^iregajtfmg'Feldinan's -inquiries,. %• . these -were "agencies
with other ^operational requirements and we ^shouldn't interfere 1
with 1:116 work of these agencies'." 107 When Feldman attempted 'to
interview Hull, Feldman learned that Hull was told by the embas-
sy staff-not to.talk.to him' -without ari attorney present. 10 ?- ■ <>
- Feldman concluded that U.S. Embassy^ officials in Crista Rica
were taking active measures to protect Hull. After Feldman inter-
viewed two of the mercenaries, Peter Glibbery and Steven Carr, re-
garding their allegations of Hull's involvement in criminal activity;
Feldman learned that Kirk KotulaV Consul in San Jose, was
"trying to get Garr and -the rest of these "people to recant their
statements regarding "Hull's ' involvement • with the CIA' and with
any other American agency. 109 Feldman added . V it was appar-
ent we were" stirring up some problem with^our inquirie's concern-
ing. John Hull." 110 Feldman concluded that because Hull was re-
ceiving protection from some US officials, that it would not be pos-
sible to interview him. 'Fe"ldmari-thereT6fe v to6k no further' steps' to
do so. 111 _: r ''- ".. " ' : _ ■ ■ - -.■ • f " . '•'-••;

In an effort to stop the myestigation.agaijist him and to cause
the Justice Department to instead investigate those urging ah in-
vestigation of ,\ftull, Hull prepared falsified . affidavits from jailed
mercenaries in -Costa- Riga to. Attorney Kellner; In the affida-
vits the mercenaries accused Congressional staff of paying wit-
nesses,^ invent stories^ab^ activities associated with the
clandestine Contras supply" network. The Justice ^Department ulti-
mately concluded that the affidavits had been forged: Kellner testi-
fied that he "had concerns about them and . didn't r believe
them."M 2 , : " V", "V ' * _, '

To this day, the. Justice. Department has taken no action against
John- Hull for obstruction- of justice or any related charge in .con-
nection with his filing false affidavits'^viththe tl.S. Justice Depart* •
ment regarding the Congressional investigations.

In the period in; which he was providing support to the Gohtras,
Hull obtained a loan from the Overseas Private Investment Gorpo^
ration for $375,000 ; which.- ultimately, proved to have been obtained
with- false documentation. ." i : .--i' . : r <. =■ •

In 1983, Hull- arid two associate's, Mr. - William Crone- and "Mr.
Alvarb Arroyo ■approached; OPIC for a loan to ; fin^ce v a;j6mt : veri- '
ture wood products factory that would make wheelbarrow arid ax
handles for the, /U.S. market: In fact; according to testimony from
Crone* and" OPIC officials, nb , cbht^butibns i fi*'om 'Huli J Arroyo or
himself were made to the joint venture. On the basis of the applica-

™* Feldman, ibid., pp. 79-85. • ' 1 ■ ...

loa Ibid.,p.86.

">» Ibid., pp. 86-88.

110 Ibid., p. 84.

111 Ibid., pp. 86-88.

lia &an-Contra testimony of Leon Kellnar/'Appendix B, Vol, 10, April 80;. 1987, pp. 1094-1095.

57

tion, some supporting documentation and a site .visit, on March 30,
1984, OPIC advanced $375,000. 113

By the end of 1985, after one interest payment, the loan lapsed
into default, and OPIC officials" began to recognize that the project
was a fraud, and that Hull had made false representations in
making the application to. OPIC. 114 OPIC officials found that the
money which was disbursed by their Agency was deposited in
Hull's Indiana bank account and the funds were withdrawn by
Hull in cash; When OPIC inquired in 1986 as where 'the funds were
goings Hull told OPIC officials that he would be- using the cash to
buy Costa Rican money on the black market to get a mOire favor-
able exchange rate. 115

In fact, Costa Rica has a favorable exchange rate for foreign in-
vestment and the^ excuse Hull offered does not make sense. What
appears to' have happened is that Hull simply took the money, in-
asmuch as no equipment was purchased for the factory, no prod-
ucts were shipped from hy and Hull's partner, Crone, testified that
he ' never saw the money. Indeed, prospective purchasers com-
plained that they paid Hull for products in advance but never re-
ceived delivery. 116

On the basis of the subsequent OPIC investigation of the loan -to
Hull's company, in April 1987, the case was referred to^the Justice
Department for a criminal fraud investigation. 117 While nothing
has yet happened for almost two years, the Justice Department
maintains the investigation is still ongoing. 118

OPIC foreclosed on the properties which Hull had put up as col-
lateral for the loan. Following the foreclosure to recover their
monies, OPIC sold the property at auction. . However, in order to
prevent a sale far below the market price, OPIC bid.at the auction
and wound up purchasing its own property for $187,500.

OPIC then attempted to sell the property directly. An advertise-
ment was placed in. The "Wall Street Journal which attracted a
single offer from ari investment banker in Philadelphia. An. agree-
riient was negotiated whereby the company purchasing the .proper-
ty from. OPIC was required to make no down payment, and only to
repay OPIC its $1.87,500 from the future proceeds of the sale of
timber cut on the iand. The corporation which purchased the prop-
erty has .no other assets, other than the land. If the agreement is
fulfilled by the purchasers of the land, OPIC will realize repayment
of $187,500; half of the original $375,000 loaned to Hull. 119

The Subcommittee also heard testimony investors who had al-
lowed Hull to purchase,property for them and then to manage th&
property, who testified that he did not deliver on his promises, he
failed to purchase the properties he said he-would, and in one case,

113 Testimony of Eric Garfinkel/ Vice President and General Counsel-, Overseas Private In-
vestment Corporation, Subcommittee on International Economic Policy, Trade,. Oceans, and En-
vironment and Subcommittee on Terrorism, Narcotics and International Operations, Part 1, Oc-
tober 30, 1987, pp. 106-107.

114 Ibid., p. 107.

»*Ibid.,p. 127.

116 Subcommittee interviews with prospective purchasers.
11T OPIC testimony, ibid., p. 107.

1 1 B Subcommittee interviews with OPIC and Justice staff, January 1989. .
110 OPIC documents provided the Subcommittee.

58

took farm equipment off a farm he was. paid to manage and cbn^
verted it for his own use. 120

In mid-January, 1989, Hull was arrested "by ^Costa Rican law en-
forcement authorities and charged y?ith drug trafficking and violas
ing. Costa Rica's neutrality. - ' *

IX. The San Francisco Frogman' Case,. UNTD-FRAN and PCNE

.The San Francisco Frogman case was one ofrfche first eases-.in
which allegations linking specific Contra organizations to drug
smugglers^ surfaced. la -a July 26, 1986 report to the ;Congress on
Contra-related narcotics allegations, the State Department d&-
scribed the Frogman case as follows:

"This case gets it nickname from swimmers who brought cocaine
ashore, on the West Coast from a Colombian vessel in 1982-1983; It
focused on a major Colombian cocaine smuggler t Alvara Carvajal-
Minota, who supplied a dumber of West Coast smugglers. It was al-
leged, but never confirmed* that jNfcaraguan citizen Horacio Perei-
ra, an associate of Carvajal, had helped the-Nicaraguan resistance.
Pereira was subsequently convicted, on, drug charges in Costa Rica
and sentenced to twelve years imprisonment. Two other Nicara-
guans, Carlos Cabezas and JuliprZayala, who were among the jailed
West Coast traffickers .convicted of receiving drugs jfrom Carvajal,
claimed long after their conviction, that they, had delivered.large
sums of money to resistance groups in Costa Rica and that Pereira,
who was not charged in, the case, has said the profits from' the drug
sale would finance resistance activities."

' The allegations made by Cabezas and Zavala involved' two South-
ern Front Contra groups^UDN-FARN, a military group associated
with Fernando "El Negro" Chamorro, and PCNE, a Contra politi-
cal group in the South. Cabezas elaimetlthat he helped move 25 to
30 kilps of cocaine from Costa $tica to San Francisco, generating
$1.S million. According to Cabezas, part of that money was given to
Trqilo and Fernando Sanchez to help Eden Pastora's and Fernando
"El Negro" Champrro's operations on the Southern Front in 1982
and 1983." 2 ' • ' ' ' , v : • "■■■'."r '

After the trial, the U.S: government returned $36,020 'seized as
drug money to one of the defendants, Zavala, after he submitted
letters from Contra leaders claiming the filnds were really their
property. The money that was returned had been seized hy the FBI
after being found in. cash in a drawer at Zavala's home with drug
transaction letters, an M-l carbine, a grenade, and a quantity of
cocaine. 128 ■' "" •••• •

The Subcommittee" found that the "Frogman arrest "involved co-
caine from, a Colombian source, CkrvajatMindta. In addition,
Zavala and Cabezas had as a second source of supply, Nicaraguans
living in Costa Rica associated with the Contras. FBI documents
from the Frogman, case identify the Nicaraguans as Horacio Perei-
ra, 'Troilo Sanchez and Fernando Sanchez. 124

120 Subcommittee testimony of Crone, Sipple and Hood, ibid., pp 147-167

121 5^ Department Document #5136c. July 26, 1986.

122 San Francisco Examiner, March 16, 1986.

128 Ibid. ...

124 November 8, 1982, FBI teletype from Sari Francisco to Director, Kfi v. Zavala, et ai.

59

Pereira was convicted on cocaine charges in Costa Rica in 1985
and sentenced to 12 years in prison. 125 An important member of
the Pereira organization was Sebastian "Huachah" Gonzalez, who
also was associated with ARDE in. Southern. Front Contra oper-
ations. Robert Owen advised North in February 1985, that Gonza-
lez was trafficking in cocaine. 126 Jose Blandon testified that Eden
Pastora knew that Gonzalez was involved in drug trafficking while
he "was working with ARDE. Gonzalez later left the Contra move-
ment and. fled from Costa Rica to Panama, where he w6nt to work
for General Noriega- 1 27 - ■ . ■ "

During the Pereira trial, evidence was also presented by the
Costa Rica prosecutor showing that drug traffickers had -asked
leader Ermundo Chamorro the brother of UDiST-FARN leader Fer-
nando "El Negro" Chamorro, for assistance with vehicles to trans-
port cocaine and for help with a Costa Rica police official. 128

Troilo and ^Fernando Sanchez were marginal participants in the
Contra movement .and relatives of a member of the FDN Director-
ate. 129 ;

X The Cuban-American Connection

Several groups of Miami-based Cuba Americans provided direct
and indirect support for the Southern Front during the period that
the Boland Ainendment prohibited official U.S. government assist-
ance. Their help, which included supplies and training, was funded
in part with drug money. 130

The State Department described, the allegations in its July 1986
report to Congress as follows:

There have been, allegations that Rene, Corbp and other
Cuban Americans involved in anti-Sandinista activities in
Costa Rica were connected with' Miami-based drug traffick-
ers. Corbo reportedly recruited a group of Cuban American
and Cuban exile, combatants and military trainers in the
< Miami area who operated inside Nicaragua ■". and in the
northern part of Gosta Rica: Two Cuban exiles in this
group, Mario Rejas Lavas and Ubaldo Hernandez Perez,
were captured by the Sandinistas in June 1986. They were
reportedly members of the UNO/FARN group headed by
Fernando "El Negro" Chamorro. There is no information
to substantiate allegations that this group from Miami has
' been a source of drug money for the UNO/FARN or any
other resistance organization. 131

, ?' s CBS Evening News, June 2, 1986.

12a Jran/Contra Testimony of Robert Owen, May 14, 1987, Exhibit RWO 7, p. 801.

is-" Blandon, Part 2, pp. 132-133.

128 CBS Evening News, June 12, -198G.

120 Staff -interview with Carlos Cabezas, March,' 1988, and with former Contras in San.Fran-
cisco and Miami.

lao FBI 302'b of Special Agent George Kiszynski, released in U.S. v. Calero and U.S. v. ' Corbo,
both Southern District of Florida, including 3/8/85 interview "of Frank Castro; 12/17/84' inter-
view of Raphael Torres Jimenez, 3/1/85 interview of Rene' Crobo; 9/6/84 interview of Jose
Coutin; see also grand jury testimony of Carlos Soto in I7.fi. v. Luis Rodriquez, Northern District
of Florida.

131 State Department Document #51S6c, July 26, 198G.

60

Wi^f^* J 86 ' Co^ttee requited iniformation from the

fnf Mlnu e & eD , 1 ro ? ardi »g ,V» allegations concer4S CoJbo
ana fellow Cuban Ame^cans.Felipe Vidal Frank CnofrA =«a it
todriguez and FVank C^nce^(twa bf

de Puntarenas jmd Ocean Hi!m^-co^ce^ tt^in^vS^

Tne Justice Department reSed to S
any information in response to this request, on^ne Sround^'Sa?
the formation" .requested remained under

and that the Committee's ^amblihfT tTirough^opIn SSoS
grayelynsks compromising those efforts investigations

I ^ months earlier, the Justice Department had ad-

vised both the press and the Committee that the^afeations h^
been thoroughly investigated and werl without foSn S >*
. At no time did &e Justice Department disclose to f hfe Committee
m response to its inquiry that extensive information hadT feS
been developed by the FBI. from 1983 through 1986 SuggS thS toat
many of the allegations the Committee* Zs inveSK

:At the^lay 6, 1986 meeting with Committee staff the CIA cat*-
goncaUydenied.that weapons had been sHppedto the ^Contr^
from the Unite* States on the flights : involvini Rene Corbo notSS
tiiat tiie material on which they were basm^tfisrassSon^ w£
classified, and suggested that the allegations that ' htfbSSSto
the contrary were the result of disinformation De en made to

In fact, as the FBIhad previously learned "rrom informants
Cuban American .supporters of the Contras had shipped wS^S
from south CTorida to Hopango, and from there to
strips on Costa Rica.^ The 'persons mvolved- admitted to the FBI
&at ;they had .participated- in such.isMpmentsT^aW 7ener^
statements about themr beginning in 1985 On JunTa !S
June 16, 1986 Rer^ Corbo^e oi F the prLcipals^e S

S!?^ ^ W £ he * had participated in sMpSg^S

ons to the Contras in violation of U.S. Neutrality laws ^
«. o ^ban-American contingent supporting the Contra effort rm
the Southem^onfcwork with P^tora untU May 30, ?984 bombinS
at La Penca. After tfce assassination attempt on Pastora theyS-

FA^\f^f Ce ^off^ 0 " E1 N egro" Chamorro of OTN^
*AKN..By mid-June 1984, the drug smuggling through the South
em Front zones controlled by the Contrll hid gro^L saffi^ntiy"

u J» Letter of John Bolton to Senator Richard G. L Ugar and Senator Claiborne PeU, August 11

*ik!£2Xt ^-^&^K^ K ^W^ May's, 1986; New

ment officials to^CommitteeSprior to JuS 26 1986 ™ d other Justice Depart
Deposition to Siibcomniittee Xffir 8 ; MRP f ;„h^ v U ? Ve ^ easi ? n; see ^^^y Kellner
regarding the case. November a, 1988, noting his 'objections to statements by Justice

■- ■ J" Winer Memcom, May 6, : 1986 meeting, Subcommittee files
,8B 581 802,8 of SA Kisyznski, released..in K&- y. Cfarfco, SD Florida, 1988.

61

obvious that Robert Owen warned Lt. Col. Oliver North at the NSC
that the "Cubans (are) involved in drugs." 137

Notes taken by Colonel Robert L. Earl during his tenure at the
NSC described how in August 1986, the CIA was worried about

..... .disreputable characters in the Cuban-American com-
munity that are sympathetic to the Contra cause but caus-
ing more problems than help and that one had to be care-
ful in Tiow one dealt with, the Cuban-American community
... and its relation to this, that although their motives were
in the. right place there, was a lot of corruption and greed
and drugs and it was a real mess. 138 ;

In August 1988, Corbo and Castro were indicted in a Neutrality
Act case involving, the Contras brought by the U.S. Attorney for
Miami and prosecuted by Assistant U.S. Attorney Jeffrey Feldman.
No narcotics-related, allegations were included in the August 1988
indictment, 139

One of the three principals in Frigorificos de Puntarenas and
Ocean Hunter, Luis Rodriguez, was indicted on drug charges in
April 1988. The others, Frank Chanes and Moises Nunez, partici-
pated in Contra military assistance operations in 1984 and 1985. 140
Nunez was employed by both the drug money laundering front
Frigorificos de Puntarenas, and by , Glenn Robinette on behalf of
the Second-North Enterprise. Former CIA Costa Rica Chief of Sta-
tion Thomas Castillo told the Iran-Contra committees that Nunez
was involyedin a very sensitive operation" for the Enterprise. 141

XL Ramon Milian Rodriguez and Felix Rodriguez .

A particularly controversial allegation arose during the course of
the Subcommittee's investigation. This involved Ramon Milian Ro-
driguezes .offer to assist the Contras,- following his arrest for moneys
laundering.

In a June 25, 1987 closed session of the Subcommittee, Milian Ro-
driguez, testified that in a meeting arranged by Miami private de-
tective Raoul Diaz with Felix Rodriguez, he QVLilian) offered to pro-
vide drug money to the Contras. Milian Rodriguez stated that Felix
accepted the offer and $10 million in such assistance was subse-
quently provided the Contras through a system of secret couriers

Milian Rodriguez testified that he also offered to assist in entrap-
ping the Sandinistas in a drug sting— all in return for dropping the
charges then pending against him.

Felix Rodriguez strenuously denied Milian Rodriguez's version of
the.meeting, stating that. he reported Milian's offer to a number of
U.S. ; government agencies, including the FBI and CIA. No action
was taken, by those agencies,; and Milian Rodriguez's case went to
trial.

Raoul Diaz refused to respond to a Committee subpoena to dis-
cuss his recollection of the meeting. Therefore, because of the diffi-

13V Nortb Notebook Entry Q-0344.

138 Iran/Contra Deposition of Robert L. Earl, Appendix B, Vol. 9 p 1109

139 U.S. v. Calero et al and U.S. V. Corbo et al, ibid. •-

1 1° V mS - X- Luts Rodn S^ Northern District of Florida; FBI 302's of SA Kiszynski ibid. •
i« Iran-Contra Testimony of Owen, Appendix B, Vol. 20, pp. 733-735; deposition of Thomas
Castillo, Appendix B, bol 3, p. 180.

62

Answer, ^yes.

points was cbrroboratodhy exte^-docuSK«3SKSb?
grand 3 ury statements by his partners in federg^SSSWS

CUBA AND NICARAGUA
Introduction

Drug trafficking knows neither national nor ideological h^A

63

•**The Subcommittee received testimony that throughout the
1,980's, Cuba has been used by drug traffickers as a transit point
and haven for laundering money. Cuban authorities have provided
smugglers- with protection for their' boats and aircraft; According to
Subcommittee' testimony, . Fidel Castro himself acted as a mediator
oh behalf of General Manuel Antonio Noriega in disputes Noriega
has had with4he Medellirr cocaine cartel ''^Fnially, the- Subcornmit-
tfee received' testimony 1 that Cuban officiate were ' involved m efforts
to establish ties between leftist revolutionary groups such as 'the
M-19 ancl cocaine, traffickers.

Several witnesses testified; that Nicaraguan officials were also in-
volved in drug trafficking. The .Subcommittee- also received testimo-
ny that representatives of the ! Medellin Cartel entered into negotia-
tions with the Sandinista government over using Nicaragua for
drug trafficking operations. Finally, the Subcommittee received tes-
timony regarding alleged statements by leaders of the Cartel that
the provided assistance to the Sandinistas.

, Historical Background

Pre-revolutiohary Cuba had an extensive tradition as a base for
the smuggling of illegal goods to the -United States, as far back as
the I8th Century; and continuing through Prohibition to the over-
throw of the Batista government by Castro. The United States has
frequently sought the cooperation - of the Cuban government in
stopping such 'smuggling. 1

By the time of the Castro revolution, organized crime had a sig-
nificant position of power in Cuba based on the wealth it had accu-
mulated by smuggling and related illegal, operations. 2 At the time
of the Cuban revolution', Castro himself claimed one of his objec-
tives was to cleanse Cuba of the environment of corruption. Since
then, Castro has conducted a highly visible public campaign
against smuggling, and the Government of Cuba regularly issues
reports highlighting its successes in the war against drugs.

The-Subcommittee received testimony that despite Cuba's aggres-
sive public stance against narcotics, during the 1980's Cuban offi-
cials had again begun to provide assistance to -drug smugglers.

• Cuba as a .Way-Station for Smugglers

. Cuba lies on .the most direct air route from South America to
Florida. Due to its size, unless smugglers^get overflight rights, hun-
dreds of. mjles • are _ added' .to . their 'trips.' "This greatly increases "the
risk of .getting caught and' forces traffickers to decrease the pay-
loads they" carry. Quite naturally as the volume of drugs moving
into south Florida by air increased in the early 1980's, the traffick-
ers became interested oh"' obtaining overflight rights from the
Cubans. Elements of the Cuban government began to offer assist-
ance. According to smugglers, this assistance was gradually ex-
tended to refueling and repair services, assistance in laundering

1 See e.g. U.S. Convention with Cuba to Prevent liquor Smuggling; February 10, 1926.

2 Boris Goldanberg, The Cuban Revolution and Latin America, 1965, p: 110: Bonachea and
Martin, The Cuban Insurrection, 1952-1959, p. 34.

M

Providing safehaven fen^S. Jaw enforcement au-

flights. While ^ate*^S^ ! ^^
was aware of offiw amSLlS? XS^"? ^ the.offer, vhe

• Eg*--- tL m ^e«^ S^ ef «
atWcagfi^^^ drug oper-

*S S^^^SS ^P^W four high
deluded a flSnbS of l^&l^n^.f ^JgW* Thly

mittee: Krnaiu^TOWteS^ST 11 '^^ Central
Colombia; 1^ft^l^^%fe5^,Cub^ Amb^aadbr to
CoIombia, : and a™Taowi?nf tw? K r Cubair^EmBassy ii

were indicted fo"S e 1?role hi t ,£±^ NaVy - ^ e four ofSi ^
never brought to trM?eSu S e^hL ^f gghng con ?P> r aPy but were
tion of the UaitedStates An rf f^' eame within *e juiasdic-
case were convicted bTfiurfwWh °*? r coconspirators in the
involvement of tlS fat ffl offi^r™" test Wony about ,the

tion was provided to^Se trafrtw F Ub ? n P^tec-
States from Colombia. C ^fe^f^^ «

- , ; - Case History: George Morales " \ '
The experience of Colombian druff" : ttafficW a*****'™' ' \ '

ing in Cuba at which oSn^^^^ fltt !Pf^'*f^
seized for violating their airspace^ H P A»ff *S ^ Planes

spa^safely aid land iii the eveTtto?an e^egehlv * fhW W

; P«pa red Slate»enUf Eiiard Gregorie, Part 4, My 12 , 1988 , pp 38M89
11 Morales, Part 3, pp. 294^295

65

ations. Morales ; was also given" the opportunity to buy drugs Cuban

S^*^^^^"^ ^gffi^ed L» Morale?LstSed
that the Cubans sold him the radio frequencies of the U.S. Coast

Sff TViT 6 * Se J^ C6 ' Drug Enforcement Agency, Customs and
local U.S law enforcement agencies." He said then* only mot£a-
tipn was obtaining U.S. dollars. 14 . ^utivd.

.Morales ; testified that Cuban cooperation with, him did not end
£W indictment. Instead, the Cubans offered him the op-
pS^V^ 6 entire smuggling operations in Cuba. He
testified that Cuban officials offered him- a house, and operational
runway and the use of Cuban banking facuities.^ Although he did
not move tc 'Cuba,. Morales skid he used a Cayo Largo bank to laun"
to over $500 000 m drug money." From Cayo Largo, Morales w^s
able to transfer his drug money to other banks around the worlds

Ideological Use of Drugs
In the late 1970's Castrd identified what has been referred to as

t^n^i^^^ 1 * 1 ?! 6 > between the traffickers and revolu-

^ e tr ^^rs have the money which the revolution-
ary ^° l£ Tfu h ^operations, and the revolutionaries con-
trol tiie W and the people the traffickers need to grow the crops
and run the processing laboratories. 19 ' - - p

Jose Blandon -told the Subcommittee of Castro's decision to
become involved with; tiie traffickers. 2 * According to Blazon in

l^m^ ld70 f A C ^° decided t0 ™* the Power of drug

aSSST s^i&ng money to export revolution throughout LatiS
tS^K^^u overall aim was to influence event? in Central
America by .simultaneously aligning himself with narcotics traffick-

M^uf^a:^ foU0Wing *» 6 « e Set *
™^ tro Purged- this policy by working closely with the M-19 The
M-19 received advice and. assistance from the Government of Cuba
even as it reached a working agreement with the Cartel's following
then- war in Colombia. 22 e

Maintaining a relationship' between the Cartel and the various
SS rK^" 11 " movements has been a significant policy goal
of the Cuban government. Blandon testified that Castro assigned

^iSfi^ b fff d0 V to ^ th e taskTf

mediatmg the relationship between the guerrillas and the Cartel

ffi?^fW?^ Rayelo-Een-edo reported to Manuel PiSert,
S d i° f t 5 e Cuban Communist Party's Latin American-Depart-
ment.^ A witness at the Miami conspiracy trial in which Ravelo-

" Ibid., Part 3, p. 296; part 1, p.49

13 Morales, Part 1, pp. 89-30. '

"Ibid., p. 65.

15 Morales, Part 3, p. 296 and Part 1, pp. 65-66

16 Morales. Part 3, p. 294.

"Morales, Parti, p. 48. ' - ; " ...

II ^ C0DU: ^^ te t teBtSm W ° f N estor Sanchez, Part 4, July 12, 1988 d 197
H ff> testimony of iWd Westrate, Part 4, July 12, 1988, p 14^'

somrmttee testimony of Jose Blandon, Part 2, Feb. 9, 1988, pp. 106-108.

pZ^°m^ ttee teStim0ay 0f ^ Bmoa R^iguez, Part 2, pp., 249, 255-256; Blandon,

23 Blandon testimony, Part 2, pp. 106-107.

66

Renedo was an indicted, co-conspirator, quoted .the high ranking
Cuban officials as ' saying,, "We'll- drown -them; [the Americans!"- in
drugs." 24 :-. ■ "

.Cuba, Panama, ani> the Caktel

Castro's role as a mediator was not .limited to disputes between
the guerrillas and the Cartels. According to Jose Blandon, Castro
ftfan acfted as a mediator -in a dispute. between the Medellin Cartel
and Noriega. The dispute: arose when JsTorifega raided a GarteHab'o-
ratory in the Darien province of Panama ' in June, 1984;' arresting
23 -employees of the Cartel and seizing millions of dollars' worth of
equipment and drugs, after accepting^ $5 million from the Cartel to
protect it. The Cartel decided to kill Noriega' in revenge, and Nor-
iega turned to Castro^ fbr help. 25 " v- 1 ,

At Noriega's request, Blandon met with Castro in Havana on
June 21 or 22, 1984. Castro recommended that Noriega return the
$5 million in protection money and return the plant, personnel and
equipment to the Cartel. 2 ^ During his testimony,. Blandon produced
photographs of himself with Castro ;which he said were taken
during |hat meeting. The . photographs were sent -to Blandon by
Cuban intelligence three months after the meetings They were
made part "of the hearing record and were used by the Miami grand
jury which indicted Noriega. 27

Blandon testified that a week later,, on June 27l3i or 28th, Nor-
iega and Castro . met ilirectly in a meeting that lasted . five to six
Hours. At ite" conclusion, Noriega., told Blandon :that /"everything
had been arranged and they .were going to proceed ^according to
Castro's proposal." 28 Although, a deal with the Cartel had been
concluded, Nbriega'was stul concerned that his life was. in danger;
as about one hundred members of the Cartel were living . in
Panama. 29 The -Cubans sent a 25-sol'dier military unit tp fly back
with Noriega to Panama to ensure his safety 1 until the terms of the
deal with the Cartel .could be carried out.?' 6 ;

Castro Denies InvolveSient

Fidel Castro personally -denounced the Blandon testimony as a
fabrication < in a lengthy interview with an NBC reporter. He
denied the; ^allegations that he mediated the dispute between Nor-
iega and the Cartel.. In addition, Castro said that Cuba was not -in-
volved in drug -trafficking; and offered td prove it. Bje said that if
^.Subcommittee members.^uld.,^dsit .Cuba .they, would 'see "irre^
futable" evidence proving that Blandon had lied. 3 * . '

Senator Kerry, the Subcommittee Chairman, told a representa-
tive of the Cuban Interest Section in Washington that he Would not
visit Cuba unless staff was permitted to '"advance ,the~ trip - and

24 Gregorie Prepared Statement, Part 4, p. 389.

25 Subcommittee testimony of Jose Blandon, Part 2, Feb. 9, 1988, pp. -101-106.
36 Ibid. . : : - .

"Ibid: . • ....

£S Ibid., p. 104-
2 " Ibid., p. 103.

30 Ibid., p:!06. • '

3 1 "Cuban Leader Castro Denounces Jose Blandon Senate Testimony," NBC Nightly News,
Feb. 25, 1988.

67

unless the -Cubans agreed to 'discuss the drug trafficking problem in
general. Senator Kerry also requested that Subcommittee, staff be
allowed to interview Robert Vesco during the course of the visit.
The Cubans , never replied, tp any of these requests, and never made
any further arrangements, for the visit* As a consequence, the trip
never took place. 32

Allegations Concerning Nicaragua

In 1984,- the Cartel explored using Nicaragua atf a site for the
transshipment, of cocaine and money laundering. Finding alterna-
tives to Colombia was importankbecause the Colombian authorities
had raided and destroyed several - Cartel laboratories in the
Amazon region. Further, Colombian authorities -dramatically in-
creased their pressure on Cartel operations after the murder of
Justice Minister Lara-Bonilla. In Panama,- where, a base of oper-
ations had been established^ General Noriega was demanding in-
creased control of the drug trade and a larger share of the prof-
its. 83

r Floyd .Carlton testified that . Pablo Escobar sent him to Nicaragua
twice m;1984. The first time he went with Ricardo Bilonik, a busi-
ness partner of General Noriega's,, to deliver money. Carlton said
he did not know who the money was for since Bilonik; handled the
delivery. The second trip to Nicaragua was to locate airstrips
which -could be used for the transshipment of narcotics. 34 Carlton
was told by another pilot that the Cartel needed long range planes
and airstrips with extended runways to handle flights carrying co-
caine .paste from Bolivia to Nicaragua. This led Carlton to assume
there were processing laboratories in. Nicaragua. 35

During the. same period, Escobar asked Ramon Milian Rodriguez
to explore the possibility of starting drug^related operations in
Nicaragua, documenting them, and then using the information to
bargain with the United States for amnesty. 36

Ramon Milian Rodriguez' account of this request is supported by
the testimony of a Miami attorney who first met with lawyers for
the Cartel in Bogota in 1985 and.later with all the Cartel leaders in
Medellih.

In October, 1986, the Miami Attorney began talking to the FBI
and the DEA about his meetings with the Cartel. He was given a
polygraph examination, which he passed. He told the DEA that
during early 198.6, a Bogota lawyer for the Cartel told him that the
Cartel wanted to make "a deal "with the U.S. Government for im-
munity from prosecution, and they, in turn, would help stop the
flow of cocaine into, the U.S 37

The Cartel lawyer told, the Miami Attorney that Cartel leader
Jorge Ochoa "finances both Sandinista and anti-Sandinista forces
iii Nicaragua by setting up .drug operations there." 38

jsa March 14, 1988 meeting between Deputy Chief of the Cuban Interest Section in Washington
DC, Manuel -Davis, and Senator John F. Kerry and Blandon, Part 3, pp. 31-32.

as Subcommittee deposition of Floyd Carlton, Dec. 4, 1987, pp. 86-87; Blandon testimony Part
2, Feb. 9, 1988, p. 147. J

34 Deposition of Floyd Carlton, Dec. 4, 1987, p. 89.

35 Ibid., pp. 93-95.5

3fl Closed session' testimony of .Ramon Milian Rodriguez, June 25, 1987 pp 53-55
a 7 Debrief, "Miami Attorney," DEA, October 21, 1986.
38 Ibid., p. 2.

68

The Miami Attorney then met with Jorge Ochoa 'and other lead-
er ?j 0f T_ the Cartel - At these meetings in Medellin, Cartel principals
told the Miami Attorney that they had invited him to meet with
them to act as a representative to "open negotiations with th'e ; U S
Government," Ochoa told the Miami Attorney that the Cartel had
certain information which could be of interest to the national se-
curity of the U.S." regarding ..developments in Nicaragua, Cuba
Mexico, Panama, and Colombia. 39 '

Ochoa. told:- the, Miami , 3 Attorney that the: Cartel had "worked
with the Communists in the past;">Ochoa stated that .^there -was a
100,000 man-army/bf radicals in the mountains consisting^ Pales-
tinians, Libyans, 1 Peruvians, Argentinians, Ecuadorians and
Cubans, which were better 1 - equipped than the army of the Republic
of Colombia and had received arms from Libya;"- *°- - -

tt The Cartel leaders told "the "Miami Attorney that they: wished to
work_ for American intelligence by supplying information about
guerrilla activities, thereby mcurrihg amnesty for ; their efforts."
The Cartel leaders proposed "to have their representatives collect
mteUigenc& for a period : of six months to a year, thereby-assisting
the U.S,.; government in getting the : intelligence it neecbson the
communist guerrilla problem. At~the end of this time period, they
would' -reeeive .amnesty or an end to -their _ extradition proceed-
ings. 41 ...

The Miami Attorney returned to the U.S. with the Cartel's offer,
relayed it to U.S. authorities, and passed a polygraph regarding
^? cou ? t - V* e DEA 311(1 ^1 then decided that conversations
with the Cartel would be inappropriate and subsequently broke off
all contact with the Miami Attorney. The material provided by the
Miami /Attorney was not subjected to further ; . investigation ' by
either ;agency in connection with Nicaragua 6f .'the Cqntras. i; " v

Additional allegations about Sandinista. involvement in drug traf-
ficking came from Barry Seal who worked as el DEA .informant
after he was caught smuggling drugs. Seal 'was given the task of
documenting the relationship of the Colombians and the Nicara-
guahs by using cameras installed in a plane he flew as part of an
undercover operation. 42

_ Seat flew to Nicaragua and obtained photographs of a Federico
Vaughn, who U.S. authorities identified as a Nicaragiian govern-
ment official, and Pablo Escobar loading SeaTs plane with dr^igs. 43
The material gathered 1 , by Seal becanie the central, evidence
thereafter used by U.S. officials citing Sandinista involvement in
narcotics. 44

After the Seal operation, was exposed, Federico Vaughn disap-^
peared, and no further information about the Seal -allegations ma-
terialized. The House Judiciary Subcommittee on Crime found that
the phone number used by Vaughn iri'calls he received from Seal
was a phone number controlled by the U.S. Embassy since 1985

30 Ibid.

40 Attorney Deposition to Subcommittee; DEA debrief November 13 1986

41 DEA Debnef of Miami Attorney, November 13, 1986. ■ ■ "
« Gregorie, Part 4, p. 165.

43 Jacobsen Testimony, House Judiciary Subcommittee on Crime, July 28 1988
"tT!! Subcommittee testimony of General Paul Gorman, Part 2, -pp. 104-107; Lawn testimo-
ny, Part 4, pp. 134-135.

69

since^^ 4 ^' 8 ' Embassy or other forei e* missions continuously

In its International ^Narcotics Control Strategy Report regarding
Nicaragua, the State Department noted that there is^'no evidence*
of the use of Nicaragua to ship drugs to theU.S. "since the allega-
tions made in 1984" in, connection with the Seal case. 46 .

Summary and Conclusions

The_ Subcommittee testimony -regarding Cuban involvement in
narcotics- trafficking was consistent with the findings of the State
Department in itsmost recent U.S.-International Narcotics Control
Strategy Report. That report notes:

U.S. law enforcement agencies, report the routine use of
Cuban airspace and terroritorial waters as safe havens
against U.S. Government interdiction efforts. Some of the
flights or sailings may enjoy the sanction of Cuban au-
thorities, as there -has been some reporting that Cuban au-
thorities have permitted narcotics ' traffickers to use this
strategic location in. exchange for facilitating Cuban aid to
guemltes. and subversive elerants.m,third countries;' 47
^Mthe State Department report recogni^d, "corruption exists in
Cubas malfunctionmg economy." 4 Sit is difficult to determine
whether the mvolvement of Cuban Officials with drug traffickers is
a matter of personal corruption, or as Jose Blandon testified, a
matter oi policy by the Cuban government. . • .

. • HAITI

"? ~. Introduction

By 1985, the cartels^hegan to seek additional transit points for
cocaine coming to the United States.- A natural candidate was the
island-country just south of the Bahamas— Haiti.
^HaitUs ^particularly appealing option for; drug traffickers be-
cause of its location, its weak and corrupt government, and its- un-
stable /political situation. The Island of Hispaniola, on which Haiti
us located, is on the most, direct route— barring transit of Cuba—

2^ Go ]? m l )ia United State ^- Haiti has harbors and inlets

which afford excellent protection to drug smuggling vessels. More-
over^ the Haitian , Air Force has no radar faculties and does not
routinely patrol Haitian airspace.. Drug planes can take off and
land freely at any of, the island's numerous secondary airstrips 1
, Since the day of "Papa Doc'l Duvalier, Haiti's^ government has'
been notorious for its corruption. The Duvalier<family and their as-
sociates profited enormously from the protection of many illegal
enterprises, including narcotics trafficking. 2 However until 1987

* 6 House testimony,* ibid,
p *144 S ' Department of State "International Narcotics Control Strategy Report," March, 1988,

157 7U " S " Department 01 State International Narcotics Control Strategy Report, March 1988 p.
« Ibid., p. 159. - ' " - „

1 Subcommittee testimony of Thomas Cash, Part 4, July 11 1988 pp 21-22.

uli!3S£S£ *^£S£$$%8^ EUr6aU ° f ***°°^ Narcotics Matters,

70

most of the drug smuggling through Haiti was conducted by indi-
vidual "transportation' organizations which made their own, ar-
rangements with; the Haitian government officials. .....

. The Colomklvns Move In :; \ - . .

Following the "departure of Baby "Doc" Ehivalier J and the presi-
dential elections of 1987, the .Colombians took advantage of the
complete breakdown of government institutions and began to move
into the;.cc-untry inrforce. They^Qcused- their efforts on corrupting
key military officers who were in a position- to -assure, that there
would-be no interference with. their operations. .

According to DEA intelligence, -the number of Colombian narcot-
ics traffickers residing, in. Haiti has. been growing^daily and the nar-
cotics organizations. arejiow using Haiti as a baise of operations,
storage site and staging area. In Addition, these organizations are
buying up iegitimate businesses to serve .as' .front "c^paxue§ for
thek,smugglmg operations. Once, having^ gained access to local
commence, they then focus on corruptn^-pubiic officials to protect
their.m^erests. s -f.

The Subcommittee heard a detailed account of the process the
Colombians used to establish themselves in Haiti from .bsvaldo
Quintana, a CubarirAmerieah who became involved in, drug smug-
glings from Haiti Miami. Quintana later testified about .his expe-
rience jbefore a -Fede^ grand jury in Mianii. He explained that the
Colombians established a working relationship with Colonel^ Jean-
Claude Paul by working through a- Haitian "named Cardozo? The
Colombians agreed to. pay Colonel Paul, the commander of the De-
sallines Barracks, for protection and for the use of runway on his
ranch for cocaine flights. 4 Command, of the Desallines Barracks al-
lowed Colonel Paul to play a pivotal role in Haitian politics be-
cause" this force is the elite .uniti responsibleifor the protection of
the Presidential Palace. s Colonel Paul's influence was very much
in evidence during the 1987 election, when much of the violence
was attributed torsoldiers. and security officials known as Tontons
Macoute acting .under his direction.^ ^ r - ' "• -

According to Quintana, ' the payoffs to Paul were to be made by
Cardozo on a shipment'by shipment basis.. In October, 1986, Colonel
Paul became dissatisfied with the amount of money he was receiv- .
ing and seized a shipment of drugs in protest. .The Colombians in-
vestigated --the seizure and; found that their middle man, Cardozo,
had been , pocketing most of what they thought he had been paying
Colonel Paul- The Colombians sent a team of gangsters to Haiti
and brought Cardozo back to Colombia, where they brutally beat
him for his "^ieft M ; The money was^repaid and Paul's 1 demands
were satisfied. 7 •- * >

Quintana also - told the. Subcommittee about the efforts- Colonel
Paul, his wife Marie Mireille Delinois, and his brother made to es-
tablish their own cocaine distribution system in Miami. 8 Roger

3 Cash testimony, pp. 21-22 and Gregorie testimony, p. 183
* Quintana testimony, Part 3, April 3, 1988, p. 148.

6 Ibid., p. 129

8 Ibid., and Holwill testimony, Part 4, July 11, 1988, pp. 55-56.

7 Quintana, pp. 148-149. . ,a ;
B Ibid., p. 131.

71

^Miam^tbld the Subcom-
which sailed betS ships
Quintana's testimony coupled vrithtnat^f^^S!.' n ,

important ^ official

^^^^^T^f^ -^Placed ^
Colonel, Prosper, Ayril to power. Avril was W*ti^ « + ? gnt

The Miami Connection

Bmmby tesbmony. Part 4, July 11, 1988, pp. 10-11
^S^P^d statement of Richard Gregoriel Part 4 Julv 12 lflRR « <«k

15 testimony, Part 4, July 11, 1988, p 48 7 * ' P ' 395 "

13 Holwill testimony, p. 55
"Ibid.

II tP* ¥ ew ¥ork Times > November 12, 1988

16 Biamby testimony, pp. 9, 12

17 Ibid., p. 9. ^

1 8 Subcommittee interviews in Miami.

72

, ' DEA's Operations in Miami and in Haiti ' --

""The Miami police and Drug ^Enforcement Agency have had great"
difficulty in. development of prosecutable cases against the princi-
pal Haitian traffickers in Miami. In order to penetrate the close-
knit Haitian society, J .ihe authorities rely on wiretapes, informants
and undercover ._ operations. However, law enforcement agencies
employ a limited number of French-Creole speaking officers, and
undercover operations have been limited as . a result. DEA regional
chief Tom Cash testified that DEA operations in Haiti were also af-
fected by this problem. 19 ,

In Haiti, DEA participates with a Haitian surveillance unit in
watching the Port aii Prince airport. 20 However, according to testi-
mony before the Subcommittee; the drugs rarely come through the
airport, but are instead moved by private ship and .plane through
Other transshipment points. 21 Even if the "surveillance provided
useful information, U.S. Attorney Gregorje argued that Haiti lacks
an honest police force and army to make arrests and punish offend-
ers. 22 Moreover, When Haitian authorities' seize' drugs from traf-
fickers, the smugglers are not only set free, but the narcotics, in-,
stead of befog destroyed,- are • often, resold by the_ authorities, 2 ^ In
characterizing the Haitian governmental structured Deputy;^ Assist^
ant Secretary of State Holwill Observed that there is ho cen-
tral government ... no judicial system . . . and '■fh'e. local army
commanders function as feudal lords." 24 ! . "\

The weakness of governmental institutions in Haiti Has made it
extremely difficult for the DEA .to Carry out its mission. Th£ DEA
regional chief, Tom Cash, testified that his agency had developed a.
joint DEA-Haiti Narcotics ■Center' for -Information' (tordiiiaiaoii/He-
then conceded that because there are no corresponding institution-
al structures— such as a navy or coast guard— to tackle' the narcot-
ics problem, the information center &oi't "mean much. He ac-
knowledged, DEA efforts in Haiti are "rudimentary at best." 25

. . .Conclusions ,

! There is little hope that serious inroads can be made into the Co-
lombian narcotics trafficking through Haiti until legitimate democ-
ratization efforts are undertaken. As long as-the Haitian -military
continues to control virtually every government institution, inelud-'
ing the judiciary and' law 'enforcement agencies, ^the cartels will
continue to operate unchallenged hv that country. •

However, tbereSare steps which could be taken to make it more
difficult for Haitians to run. their cocaine .distribution networks in
the United States. One of these might include an immediate review
by the Department of State of visas which have been granted to
Haitians residing in Miami who are suspected of being involved in
the drug trade. For example, two witnesses identified Lionel

13 Biamby testimony, p. 12.

80 Gash testimony, n. 23.

21 See generally Quia tana testimony.

2fi Gregorie testimony, pp. 183-184.

23 Biamby testimony, p. 6.

" HolwiU testimony, pp. 53-54.

3B Cash testimony, pp. 83-44.

73

HONDURAS "
Introduction

w^ dur ^ h ^ ece ^ d , lar ^ e amounts of U.S. assistance In iq«fi
History of Narcotics Trafficking in Honduras

1 WCSR, State Department, March 1988, p. 128

ttonduras: U.S. Foreign Assistance Pacts " bv RnWf p c= \. -a ■
faonal Defense Division, Co^ressional EaSch S^^tS^waTp^ ^

■74

throughout Central America' to protect his arms dealings and his
entry into the drug trade. His counterpart in Honduras, the head
of .the Honduran military intelligence in the late 1970's and early
80*s was Colonel Torres-Arias. 3 :

Jose Blandon testified that Noriega drew Torres-Arias and a
close associate of his, Colonel Boden* the commander of an-armbred
division, into the business of supplying weapons' to the FMLN
rebels in El Salvador, Several weapons flights ifrom Noriega to the
FMLN in Salvador -went through Honduran territory and were, pro-
tected by Torres-Arias and' Boden. ■ When r'Blandsn was asked
whether he : . personally knew that -weapons were being shipped
through Honduras to the rebels in ElSalvador^he responded/ Of
course." 4 ' ... . / ■ ••: •• -

He went on to testify: : ' - , ■ - ; - '.

... Noriega coordinated . meetings in Panama with the
Directorate of the Farabuhdo Marti Front to establish two
routes for the supply of arms to El Salvador, one through
... the Gulf of Fonseca and another in the North' of Hon-
• duras called the Ho Chi Minn Trail: "

Did you attend any of those meetings? " - -
■> Answer. I attended both meetings. 5 " ; .• *v J "

In 19.83, JjTonega ^arranged two meetings- between ( Tbrres-Ar^as,

Bo4^n and the FMLN rebels. Noriega wanted to haye Fidel ; Castro
introduce- Torres-Arias ahcLBoden to the FMLN leadership i in. order
to facilitate the development of, a direct relationship.' 6 „T6 conceal
Havana as their real destination, Torres-Arias and Boden said tiiey
were traveling to. visit Noriega in Panama.'' wen| to Panama
but were then flown to Havana in a Panamanian' military jet for
secret meetings with Castro and the, FMLN. When ttie' word of tihe
trips to Havana began to circulate among the Honduran <miHtary
leadership, Noriega passed the details back to the CIA, 7 ;News"of
the trips caused a scandal which led to the dismissal of both
Torres-Arias and Boden from the Honduran military.

Blandon testified that by 1981, ."the relationship ""between Noriega
and Torres-Arias had.expanded into narcotics trafficking. 8 Blandon
also testified that he , had indications that ;the network, of clandes-
tine airstrips in Honduras which was being .used., to supply the
Honduran-based Contras were being usedJby drug planes A

Honduran coastal waters also have been used to transfer mari-
juana from mother ships to smaller shrimp boats, for/runs, to the
United' States. Convicted smuggler, £eigh Ritch testified that he
had cargoes.of marijuana, transferred from Colombian mother ships
to their shrimp boats in Honduran waters. Ritch testified that the
shrimp boat they used looked exactly like the ones the Hondurans
used and blended in with the Honduran fleet. The Colombian
mother ships off-loaded the marijuana "to the shrimp boats at night

3 Testimony of Jose Blandon, part 3, April 4, 1988, pp. 14-16.
:*Ibid~ ■ - -
5 Bid.

"Ibid., pp. 17-18.
7 Ibid., p. 15.
s Ibid.,p.a5.
B Ibid., p. 17.

75

While Vogeitestafied that he never personally used Hondura he
r=rl a m ^^ S ° Ut ° f Honduri in conf^Jon^

agent, who opened the first DM tfrke ^HoXaT^igsl
Zepeda, m a Subcommittee deposition, , stated that Honduran
o^" re b6mg for transshipment to a con^deS

♦i. He - ; ^*- <9l i? that such transshipments were protected hv
the military. When the DBA would ask' the Hondu™ Naw tl

oSfw^df 1 * 8 ' b0atS ' ?6Peda S&id ^ cfe&S

' "--ft? & ^TfS** 1 numl5er of Problems, lack of
, fuel; , the boat would be. unable to operate. And frequently I

& hl^ tW^^T**"* request Sta-
tion .to buy iue for the patrol boats so we could go out on -

^tvofve^^^^t^^
information on to Washington 15 Afvor^t 7~ £ Passed the

Torres-Arias was r^sJ^^J^S ^J^^

th£ ° f * he artned foftes-contmued/^eS^

ffie dr^^ffiS^/t 0 ^ 611 Corruption of the Jm&bt
t^gtraffickers andtiat the corruption made his work uffi

"It was difficult to conduct an investigation and exDeer WAn
.dwan authorit es'to ^sist unarrests Aen it was them wt we£
trymg to investigate," he explained 16 "- '■ v

clo^SkneT 1 ^ ''t*S& > tf D ^ offece ^ Honduras was
if w v ? ■ of , 19 83 for 'budgetary reasons." " Zepeda said that
rf he had been asked, he would have argued that the officfe should
have stayed ; m operation. He said that Jven though tliere haS not

^e^teSalfeDP^fe' 116 ? QSed ' Ze ^ wa£ *S* to

me uuatemala Uty.DEA office, where he continued to sirend 70%

if^uf1u de f nS m S? the "onduran d ra / P r„blenf le I

o^H^ur^^ 1 ^' 11 G, ~ ,a ^ seyerelhan &e

" Testimony of Leigh Hitch, Part 2, February 8, 1988, p 63

™lbit% 32 ° tmdmel Voge1 ' UaTch 31 - 1988, PP. «5

" Sfje^ Deposition, Part 4, April 6, 1986, p. 720
*■* Ibid., p. 722.
ls Ibid., p. 720. -

"Ibid., pp. 721-723. s

17 Bid., p. 724. ^

18 Ibid., pp. 724-725.

76

Bueso Rosa, Latchinian and Nakco TekroroSm ■ ' - ■

On October 28, 1984, the FBI seized a shipment of 345 _ kilos' of
cocaine worth an estimated $40 million on a .rural airstrip in South
Florida. The proceeds from the sale of cocaine were to have been
used to finance a plot to ^ assassinate^ Honduraii President Roberto
Suazo Cordoba. 19

Arrested in the plot were General Jose Bueso^Rosa, who was at
the time the Honduran military attache in Santiago, Chile, Geoard
Latchinian, a Honduran -arms dealer living in MamV and Faiz" Si-
kaffy, a Honduran businessman also living in' Miami; All were
charged with conspiracy to commit murder. 29 ¥

At the time of the arrests, FBI Director William Webster stated:

We don't want international' terrorists to Establish .
beachheads or bases for operations in the "United States
such as they have enjoyed for years in other parts of the
world. 21

Factuat ' Admissions by i:he United" States in the, trial of Oliver
North; released publicly on April 6, 1989, revealed that "in mid-
September; 1986, Lt/Coll North advised Admiral' -Poihdexter that
U.S. 1 Ambassador Negroponte, General Gorman of South Com,
senior CIA. official ^Duane Clarridge, and £t. Col/ North had worked
out arrangements for support of the [Contra] Resistance with Gen-
eral Bueso-Rosa, ;a former Honduran military officer wjidhad re-
cently been convicted of offenses in the' U.S. ht. Qoh North suggest-
ed that efforts be made on Bueso-Rosa's behalf to deter him from
disclosing details of these covert activities^ 2

Buesp-Rpsa was subsequently extradited from' Chile to the Umted
States. While Latchinian was conyic£ed;by a federal jury on con-
spiracy charges an| sentenced. to 30 ..years in, prison,: Bueso-Rpsa
was treated very leniently. He was sentenced to five years at Eglin
Air Forbe Base, federal. prison- camp in Florida, after senior, U.S.
government officials attempted to intercede on. his behalf since
f( v he had heen a friend to the U.S. ^ /involved in helping -us
with the <>ntras." 23 The Justice Department had objected strenu-
ously to the lenient treatinent accorded Bueso-Rosa, arguing that
the .conspiracy was . the "most significant .case of narco-terrorism
yet discovered." 24 \. , ' _ , . _

On Noverhrjer 21, 1987, Jorge Qchoa was arrested on a highway
in Colombia driving 'a $70,000 P.orche owned by Said Speer, a. Hon-
duran Colonel serving as a military attache in Bogota. Said-Speer
denied knowing Ochoa : and said 'that his useof the' car was linau- ^
thorized.^But^'Ke could not explain ' how he washable to purchase
such an expensive car on the' pay of a Honduran Colonel. 25

19 "FBI Nips Plot to Kill President of Honduras," By Robert E. Taylor, The Wall Street Jour-

nQ iti^apers e Show 9 ^rug Link to Suspect in Alleged Plot Against Honduran," by Jon Nord-
heimer, The New York Times, November 3, 1984.
2 1 Taylor op cit.

" Agreed Statements, U.S. v. North, U.S. District Court, 1988, * 102. . _
" Subcommittee testimony of Francis J. McNeil, Part 3, April 4, 1988, p. 52 Iran/Contra dep-
osition of Mark M. Richard, Appendix B, Volume 23, August 19, 1987, pp. 122-128

« ^Htoy officers in Honduras are linked to the drug trade," by James Le Moyne', 'The New
York Times, February 12, 1988, p. Al

77

On November. 19, 1987, a week after authorities in Florida confis-
;c.ated: .the- largest seizure of drugs ever, in the U.S. (8,000 pounds of
cocaine) which had been packed in hollow furniture in a Jlonduran
factory, DEA announced plans to reopen its Honduran office^

"V t: . .; Ramon Ma4ta3aiXesteros

' & March a?8o, DEA -Agent • Enrique Camarena was kidnapped
and brutaliy murdered in . Mexico. Camarena had been investigat
mg^the^ activities of Ramon Matta Ballesteros and Miguel Felix
Gallardo at-the tune 'of his kidnapping: Both Ballesteros and 'Gal-
£lardo were believed to have heen partners in a large cocaine smug-
gling organization- which -worked through Mexico to the . United
btates. Following Camarena's murder, DEA began an intensive
search for Matta.

Matta was born in Honduras and grew up in an environment of
extreme poverty and illiteracy. As a young man he obtained a false
visa and moved to the United States. He was eventually captured
hy immigration officials and deported. He returned to the United
btates where he was sentenced to five years ,at a minimum security
.prison m Ffonda: After serving three and one-half years of his sen-
tence, he bribed 'his way out. of prison and fled to Mexico where he
joined Mrug smuggling ring: He rose through the ranks to become
one ot the top people ;in the smuggling organization at the time
DiiA agent Camarena began his inquiry. 27

DEA tracked Matta to Cartagena, Colombia where he was arrest-
ed and set for extradition. The Medellin cartel planned an escape
from the La Ficota prison in Bogota but the 1 Warden, Alcides Aris-
mendi, blocked their plans. ; Ih revenge; the Carteal murdered Aris-
mendi while his car was stalled in Bogota- traffic. The Carters
'secondattempt at rescuing Matta was successful. They paid $2 mil-
lion m bribes to the prison guards and Matta walked out of jail and
flew;to Tegucigalpa; Ghce-baek. in Honduras, he surrendered to au-
thorities ; on outstanding -murder charges. He was subsequently
found mnocent and resumed a "normal" life. He believed' that he
was safe from extradition to the United States because the Hondu-
ran constitution forbids the extradition of Honduran nationals
...Matta. who had been characterized by U.S. Customs officials as a
c i? ss 1 D £ A violator,, quickly become- one of Tegucigalpa's leading
Citizens. Me helped, establish an airline company, SETCO which
among, other services provided cargo transport services for contras
based, in Honduras.? 8 He took, up residence on a large estate and
began giving money to the poor. At the same thneT U.S. law en-
forcement officials believed that he began running his cocaine
smuggling bperatiqn from Tegucigalpa, Their suspicions about his
.activities increased as the result of two large seizures of cocaine
from Honduras in South Florida. The seizures, which .totaled moire
,than 5,000 kilos were both concealed in containers snipped from
Honduras to the United States.

w 20 !?"^ 100 ^^ §° ™ U . raB ^. dru e transfer point; DEA reopening office in Tegucigalpa," The

tl '^A^J^ 3 H on dur an drug lord" Dave von Drehle, Miami Herald, p. 1 April 1 1988
as U.S. Customs Investigation Report, May 9, 1983, pp. B-10. ■

■78

In addition, convicted smuggler Michael Voget stated that in the
course ' of his drug- trafficking and looking into the possibility of
•traffiG^^'throti^'^Mufas, 1 ^ wad informed that- an juidividual
named ; Matta wa*s the Cartel's point-man in" Honduras specifically
and Central America generally, and that to engage in any narcot-
ics activity in Honduras one had to have his Cooperation. 29

Despite his connection to the, Camarena murder ^driiS'wMely
suspected drug 'dealing; th&. United ,'rStates did not pressure^the
Honduran government to take-steps tQ^expel him from the^country
or curb his activities- until /Apial .•19t88.--f^' , April.-5, 11988, ithe^mfii-
tary arrested him and expelledj him from the country hy ^putting
him oh a plane to the Dominiean Republic. Upon'arrival in the Do-
minican. Republic, he* was put on: a plane to Miami with American
authorities who arrested his as soon as the plane was in American
airspace. The arrest occurred on the eve of Zepeda's scheduled tes-
timony before the Subcommittee. .

RlGOBERTO REGALADO LARA - , . ■ r

Oh May 16/1588,. the Honduran Ambassador tb.Panairia was 1 or-
dered held without bond in Miami after U.S. Customs agents found
nearly 26 pounds of cocaine'iti iiis luggkge. - J" ■ \ -"'

The Ambassador, Rigoherto Regaladp Lara, a retired fionduran
army Colonel and stepbrother of the Honduran armed forces' com-
mander-in-chief, had been Ambassaclqr to Panama since 1986. In
response, to the arrest, the Honduran government liotified U.Ss au-
thorities that Regalado's diplomatic immunity had been suspended,
allowing Regalado to he prosecuted under the laws of the United
States. - ' v

Regalado had arrived at Miami International. Airport from- Tegu-
cigalpa on a TAN" Airlines flight on May\15^A Customs inspector
checking his luggage found the cqcaine inside 10 packages sur-
rounded by coffee and wrapped in plastic; concealed inside pant
legs and other clothing in his suitcase. 3 ? •-' '

Policy Issues

A review of the history of gun "running and drug trafficking
through Honduras suggests that elements of the Honduran mili-
tary were involved in the shipmentof weapons- to the FMLNlh" El
Salvador arid in the protection of drug traffickers from 1980 on.
These activities were reported to appropriate U£.' government offi-
cials throughout the period.

- Instead of moving decisively to close down the drug trafficking
by stepping up the DEA presence in the country and using the for-
eign assistance the United States was extending to the Hohdhrahs
as a lever, the United States closed the DEA office in Tegucigalpa
and appears to have ignored the issue. Little public, attention. was
focused on the presence of Matta Ball^steros in the country until
the February 1988 New York Times article. 31

2fl Ibid., pp. 32-33.

30 "Ambassador held .oh drug-charge," The Miami Herald, May 17, 19S8. "

31 "Le Moyne, New York Times, op. cit. s>

79

..- PANAMA \
Introduction

l^e indictment of General Manuel "Antonio Norieea nn f~w*T

them on a variety of matters, includine dra^pr,fn^.rS^ £
also a consequence of the desire f Mo rcement. It was

relations witl ^^J^^^^.^ bl t ^

in the^narcotics business with ..the p2£ TdlcW Th? w*
mony .of both the former Pariamanian tffiS 1£a lZ' A f St J"
flckers associated with NorW^^^ed *fiS? 1™* traf "

EM*" ^ ^ N ° ri ^ a ^^n^dl^tiriub
committee received testimony from drug traffickers wfe^nS'

mto ^eemente with General Noriega £

Significant information-essential to rps^tr Q r™„« , ^
understanding of the evolution of US poHcTto NoriSS ff 6
kept from the Congress by the Executfve fra£ch^°S fig?
Senator Kerry asked the General Accounting nmJl f« • ' ? '
v^t files in the Urgencies g^^ffc
termine the process by which that .policy was made tht
National Security Council denied the GA'O access to thffife n'ec^

80

saiy to complete the job on the grounds of national security. The
NSC ordered all relevant agencies to withhold their files on
Panama from'the' GAO. As a consequence, the Subcommittee has
riot been able to undertake a fall analysis of how the Noriega prob-
lem was handled^by the U.S. prior to his indictment.

The -'Subcommittee believes it is essential that tlje. hew Adminis-
tration make it pdssible for the GAO to follow through with its
review of pas£ U.S. policy toward Panama. 1

• / Origins op Corruption in Money Laundering

Until 1968, Panamanian politics were; dominated by a small
group of leading families which controlled the economic and politi-
cal life in the country. Key decisions were made by coalitions of po-
litical parties which worked out disputes among these elites. 2

Omar Torrijos, a populist general, changed the system in 1968,
when he led a coup against the civilian government and put him-
self in charge of the country. The military took control of the polit-
ical system, and began to integrate the urban lower classes and the
rural peasants into the political and economic mainstream of Pana-
manian society. 3 _ . • ' .

.Torryos then turned his attention.to^developing the Panamanian
economy. These efforts included the. development of Panama as an
international banking: center. Torrijos was advised that Panama
could simultaneously become a tax- haven by eliminating incpme
taxes and a bank haven by developing strict; bank secrecy laws
along the lines of Switzerland. By using the :U:S. dollar as its offi?
cial currency and developing a legal system- which allows the ?orr
mation of "hearer share'' anonymousocorpbrations, Panama could
become -an ideal site for pebplerand/insttt^ the
worlduto deposit their money;without,havMg to-wbrry about con-
vertibility, taxations or disclosure.-* ; -

During the late 1970's and early 1980's,^ illegal dollars began to
enter Pahama/vda private plahes,\by private couriers* in passenger
suitcases on commercial flights, and as air-freight Eventually, this
activity was facilitated by the Panamanian' military, who super-
vised the off-loading of cash into armored. cars. 5 ' • "

By the end of' the Garter Administration, U.S.- intelligence had
begun to recognize Panama's increasing importance as a center for
laundering U.S. currency. By the early 1980's, the Central Intelli-
gence Agency suspected that Panamanian officials were invblved in-
facilitating money laundering for drug traffickers. * U.S. : policy
makers did not 'take any -steps in response to this evidence,; howev-
er, and official corruption in Panama, spread from money launder-
ing to a . wide array of criminal activities* including- narcotics traf-
ficking by public officials, their relatives and associates.

1 See GAff-NSC correspondence".

2 "Panama's Political CrMs: Prospects and U.S. Policy Concerns," CRS Issue Brief, June 16,
1988, p. 2.

3 Ibid. . , -

'* See Subcommittee testimony of Martin Mayer, Part 3, April 5, 1988, pp. 67-68.
5 Subcommittee testimony of George 'Morales, Part 3,. April 7, 1988, pp. 293-294; Xeigh Ritchj
Part 2, February 8, 198S, pp- 66-68; Ramon Milian Rodriguez, Part 2, p. 247. .
- 8 Subcommittee testimony of 'Admiral Murphy, Part 4, July 14, 1988, p. 239.

81

their MWaaXmHTi^ cocaine traffickers: through
^^^i^^^^^FJ^^-^^ Lilian Rod:

ated. an .agreement 'on behalf of th™Medl?S? g r^fi? ' ? e ne ??^
to ten percent-, depending on theScSSfi ne percent

Milian Rodriguez testified that in Mav J 983 nv^o„<, j -j j
eliminate him as a middle-mari f^ioT,tj • ' Na PfSf decided to

Noriega arranged to taSSffi^'SSSt^S? 1 - *?* T n - ey '
activities of MUian Ro<irim^ ^ on S >r Ia ™dering

,-ShoriIy.aiter Mian RodriiW arrest in 1 Wrw - j •
member of Noriega's "civiSn gW' J ^fsaF^odiaguaz, a

fickers with currency to Smde? to ^^^f Ji Taf ~

merce ' .,6*g«trf ^ Com-

cer who had ^rts^fm^^tJ^J^^ * B ? CI
became the WXffiXiaii^

deSeJW^ Awan
died money fr£n- drug dealers ** Howpvp t^t^f ***** ^
edged having an.w£^&J^S fear Rodr^,^^
included multi-million dollar loan^ Rodriguez which
ouent indigent on

AiStMg^SST ^ Part 2 - Feb " "88, pp. 254-255, Blandon Part 3

See The ^Hu^on Post, April 3 , 1989, "Panan^ Arrest 5 Accused in Drug Ring A '

14 Ihid.,p.513.

82

he lied to the Subcommittee about his role in the money launder-
ing business.- His testimony on this subject has been referred to the
UK Attorney for possible prosecution for perjury. * l
. According to Awan and officials of the bank, in 1982 Noriega
opened an account at BCCI with large amounts of cash. The ac-
count gradually grew to around $20 million through deposits of -sev^
eraltaundred- thousand dollars in cash at a time.- Noriega instruct-
ed the bank'tO keep^he records of the account away from Panama-
nian^ nationals^ and to bookHhe account .outside of-the country. 15
-Noriega then used the account^to make cash payments to Pana-
manian political figures. Awan said that he assumed that the pay-
ments were being made in connection >with the presidential elec-
tion scheduled for< 1984. He said Noriega gave the politicians hand-
written notes which instructed the bank tO'hand over to them, cer-
tain amounts of cash; Noriega then called the bank to say that
someone would be- coming by with a note of instruction, and Awan
would give the cash to the person with the note. 16

. . Early- Panamanian Involvement in Narcotics

The Panamanian military first formed ties with ;drug traffickers
in the early 19Y0's. According to press account?, these initial con-
tacts were rioted by the US Bureau of Narcotics and Dangerous
Drugs' (the "BNDD V which identified Noriega,- fhfsn. in Charge of
Panamanian military iritelligerice, as working with the traffick-
ers 17 •'• '
" In 1972, while the United States was negotiating with Panama
over the future cohtrOr of the Canal, the brother of the late' Gener-
al Omar Torrijos, Moises Torrijos, was indicted for smuggling drugs
in Panamanian' diplomatic ,pouche£ U.S.^ law enforcement authori-
ties learned ihat he was planhmgto'trahsit-.the-Ganal Zone, which
at that' time was under U:S? jurisdiction, ;and'made pjaris to have
him arrested. .However, General Torrijos was alerted, that his
brother was about to 'be arrested as soOn as M entered the Canal
Zone. It was this tip that allowed Moises." Torrijos to escape cap-

During' consideration of the Panaipa "Canal Treaties, the Senate
Select Committee on Intelligence was asked to evaluate narcotics
intelligence '"on Panamanian- involvement in the drug trade. The
Committee's then-Chairman, Senator Birch Bayh, reported to the
Senate ori the BNDD's evidence Of involvement of prominent Pana-
manians in drug trafficking. Among 'those cited by Bayh were Gen-
eral Torrijds' brother, Moises Torrijos, then-Foreign Minister Juan,.
Tack, who was said to have sigried :; the diplomatic passports of, drug
smugglers, and Raphael Richard Gonzalez, the son of the then-Pan-
amanian Ambassador to Taiwan. 19 Moises Torrijos' drug -traffick-
ing was cited by some Senators as justification for voting- against
the Treaty. 20

15 Ibid-, pp. 477-479. <■-'?'

&*"''^Panamaniaii military officers deemed drug traffickers," Knut Royce, The Times-
Union, Albany, New York, June 10, 1988, p. A-V .; ' "

ia Coneressional Record, Feb. 22, 1989, p. S4115.
is Senate Congressional RecordTFeb. 21, 1978, S3980-3981.
20 Congressional Record Feb. 21, 1978, pp. S3975-3983.

83

tfc^*^ Passage-pf the Treaty, no further action was taken by
&SL§ £ ' 1 ^P°^> drug-related corruption in Panama
Indeed^ the issue of official corruption in Panama faded from'
pubhc prpminence until Noriega took power following the deatliof
Torrijos in a plane crash on July 31, 1981.

i: . Noriega's Corruption-of Panamanian Institutions
The first ties between the Panamanian military and narcotics
traffickers took^.while^rieral Torrijos was-^lXe.^How-
Zion t^—^T "^d his power, the narcotis-
ation m Panama grew significantly more serious. As a conse-
quence the notary took increasing control of Panamal mosTint

C^F^^TvT* ^ the . m only to generate revenue
for PDF officials, but also to exercise control over the drug trade 2 *
Noriega gained control of the Customs, Immigration and Pass-
port Services, Civil Aeronautics, the National Bank of Panama and
the Attorney General's Office, which together^ represented the
major Paiiamania^ with jurisdftiori o^ffiVnarcote

trade. Noriega pushed legislation through the National Assemblv
consohdatang the National Guard, Air Fol-ce, Navy\ poH?e,^d^
fcfe ^ Cpmmand ^ *? Pa^anS Defehse
_ As head of the PJ?F, Noriega now controlled all elements of the
S 0 ^™ 2 *^ essential to the protection of drug tra?
25?^ f^d money laundenng, thus accomplishing two goals limul-
taneously-mcreasing his control Over Panama and enriduWW
sett Noriega had turned Panama's political system Into whlt^e
witness, termed a "narcokleptocracy?' a political system inwhich
Panamanian government befcame controlled by personal ^ loyalties

corruption in Panama ultimately included many of the ¥d¥s Tton
officials Ajnong^hem were: Major Nivaldo M^rinanVchief of the
5^^**^** £ ^tigations; Major' Luis Coraoba, Chief
cJt™^?!^ 0 * department of Panama; Major Luis del Sd
tammander, Chmqui Region, an area used by drug smugglers Tor

served asXJhief of the Panama Penitentiary arid as a liaison with

M^#i^ e ^^ J0 ;T J ^^ Ben ^ ez ' Oomriiander, Colon Re^on;
SSL^ 61 ^no, Noriega's personal assistant/ Major Hilario
Tnijillc ^Commander of the Central Zone; and' Captain Luis QiSel
whom Noriega simultaneously placed in charge 1 Panama's antfc
tog smuggling unit and as a liaison to the^eSmTcartll j££-

^'Sfifi.™ a * the .!f me ^e Noriega's representative to the
Dh*A, and thus m a position to alert the drug traffickers to wW
ever uiformafcion:^ DEA. ; had prdyid^Iuitt.** ' amcKers to what "

« Subcomguttee Testimony of Carlton, Part 2, February 10, 1988, p. 216.

11 fe do S: 2* Febr «wy 9. 1988, PP- 101-102,

Is W™? Ro ^ n Suez > Part 2, p. 255; Blandon, Part 2, p. 14B

Partf^. % ? P " 91_9 ^ BWon Memor W dum to Subcommittee, Feb. 8, 1988; Carlton,

84

Blandon told the Subcommittee that a group of officers from the
Panamanian Air <Force also participated . iri drug trafficking, for
Noriega, among them Colonel Alberto Purcell, Lt. CoL Lorenzo
Purcell, and Major Alberto Fundora, as well : as Air Force Chief of
Staff Marcos Justines, all of whom enjoyed 1 the profits' of the smug-
gling operations. 26 ^ ; .

In addition to these military groups, Noriega also worked closely
with a group of non-military personnel who became known .as ^the
civilian group.". This group, which: included his personal pilots^enr
gaged in a .variety of criminal activities at Noriega's direction.
Prominent members of this group whoihandled illicit operations for
Noriega included Enrique Pretelt,. Ricardo Bilonik, John and Jorge
Krupnick, Carlos Wittgreen, George Novey III, Cesar Rodriguez,
and Floyd Carlton. 2 7 - ^ 1 •'' ^

■ = Noriega's Involvement in the Arms Business

Even before Torrijo's death, Noriega had been active in the gray
market' arms business, using ids control of the government security
apparatus arrange Panamanian end user, certificates which le-
gitimized tfie' shipment of arms to Panama. Once in Panama, Nor-
iega wouldisell the weapons to whomever bid the mpst^for them. 28

His earliest clients included the .Sandinistas who" were then
trying .to. overthrow the Nicaraguaii government of Anastasio
Somoza. 29 liie weapon's were purchased in Europe^ by Michael
Barari aiid Jorge Krupnick, who worked with Noriega. 30 The arms
were moved to Costa Rica for shipment to the Sandinistas; tinder
the eye of Noriega's partner, Costa Rican Security Minister Johnny
Echevarria. Although many weapons were in fact sOld^to the Sandi-
nistas, many moi-e wound up in storage in, Costa Rica when the
Sahdinista war ended in I979: 31 ' '

According to Floyd Carlton, a partner of Cesar Rodriguez and
pilot for Noriega, the excess weapons were .then marketed by
Panama to %he rebels in El Salvador. 32

Carlton and his partnei Cesar Rodriguez flew the guns into El
Salvador in 1980 "using Panamanian mttitary aircraft. One one 'of
the trips, Rodriguez' plane was damaged, on -takeoff and crashed
when he tried to land in El Salvador. Carlton, who flew a second
plane on the* same delivery mission, pulled Cesar Rodriguez from
the wreckage, put him in his plane and flew to Panama where they
both- went into hiding. 33

; When Salvadoran officials discovered the wreckage of the Pana-
manian, Defense Forces plane, the" origin of the weapons for the
rebels was obvious. According" to Blandon, the, Salvadoran govern-
ment formally protested to Torrijos about the weapons deliveries,

2B Blandon Memorandum to Subcommittee* Feb. 8; 1988.

27 Blandon, Part 2, p. 91; see. also testimony of Steven M. Kalish, Senate^permanent Subcom-
mittee on Investigations, January 28, 1988; and Blandon Memorandum to Subcommittee, Feb. 8,
1988

"Blandon, ibid., pp. 86, 138.
EB Ibid.

30 Subcommittee Testimony of Jose Blandon, Part 2, February 9, 1988, pp. 93-94, 140, '■

31 Blandon, Part 2, Feb. 9, 19S8, pp. 139-140 and Testimony of Francis McNeil. Part 3; April 4.
1988, p. 53. ' ■ - '

" Subcommittee-testimony of Carlton, Part'2, Feb. 10, 1988, p. 193.
33 Carlton, Part 2, February 10, 1988, pp. 193-195.

.85

pU\%^ inquiry that failed to ex-

tacontactS;wito Noriega used

a nnd an 4 develop wea^ ^^^^^^^

f^^^^i^Zlt- *e El Salvador
Panama.to .Costa Ri| a ite T^P™? "?f*POi53 &om

many of the .pilote moved lir&ed ?S° rdm ^: to Werner Lota,

deals arid narcotics. Amb1gl?orW?s SS2L la ^eriag, weapons
tionships with . cOmpainef opera^ ^ess mtereste were rela-

^V&vte^l^ deluded a cpmpany
which has had the monopoly on ^S« t SenQ i c ? ed MarjnacI
the Panamanian merchant marine V^it^nT^ l°t seamen fa
duces-more'than $20 milhonTrolr ** A^- y business pro-

oKsm^^^

: Noriega and the Cartel '

^a^S*f *o deal ^ith Nor-
believed Noriega Mone tnTt •« ecp i al rank because they

^^fete^.^^^-M^ cocaine
through the agreement ne™H=?^ rH? i^ deT S^ their drug money
permitted ftSt ^^J^^^^B&n^
eluding one in the provihcTofEl Darien in T ~ t? i S m?Pffl «. in-

« Clc^Testimoay of Milian Rodriguez/June 25, 1987, p. 8S. ^

86

negotiated on Noriega's behalf by- Lt. Colonel Julian Borbua Welo
of the Panamanian National Guard. Third, he Vegan to use mem-
bers of -his "civilian group" to smuggle- riarcdtics- a^rectly.*^

In 1982, Floyd "Carlton was both a inemb'er r of General Noriega's
■"civilian =grojip"' and^Gl^er^"' t No^iega , B^per^na^ pilot. In 1986,
Carlton 'was%rrested by the' United States, and convicted on nar-
cotics charges. In 1987, Carlton became a principal witness against
Noriega- in the' Grand Jury ease brought -in the Southern District of
Florida that led to Noriega's indictment. • - ? „* "

Carlton -described in detail to tfte Subcommittee how he estab-
lished a narcotics -trafficking business, on Noriega's behali with the
Medellin cartel. ' -

Carlton testified that he entered the business of smuggling co-
cjaine'lQ mid-1982 while working as ]^orie : gaV personal pilb'i, Carl-
ton said that he had several meetings with Pablo Escobar and Gus-
tavo Gayera, two leaders of* the cartel, wlio "asked him to_ Smuggle
cocaine froin Colombia into Panama for tfee cartel. : Carlton initially
declined, but changed his mini after discussing the matter, with
Noriega a few weeks later. .

' Carlton 7 testified" that on his second meeting* with ESseobfitf, Esco-
bar offered to pay Noriega $30,00,0 to: ^40,000 -per' load of cocaine,
and Carlton $400 per kilo. According to Carlton, Noriega ' advised
Carlton that this was too little, and that he wanted $100,000 for the
first trip "in advance. The cartel agreed. Ultimately, Noriega 1 " was
paid $100,000 for Carlton's first flight, $150,000 for Carlton's second
flight $200,000 for CarlWs' third mghtofcocainei^nd $250,000 for
Carlton's fourth flight of cocaine. 42 , . , v ; " . '

Carlton testified that he was only:pne of Noriega's several, part-
ners in drpg trafficking. Among, others wer§ besar .Rodriguez, a
d^iig pilot who obtained the, planes, needed to smuggle narcotics
from among those seized by the Panamanian government from
other traffickers. 43 - ' . .

Noriega's Rift With the Cartel

In May, 1984, on the day of the Panamanian elections, the lead-
ers of the Medellin cartel came to Panama to meet with the former
president of the country^ Lopez -Michelsen. They had engineered
the assassination of the. Colombian Minister of Justice, Lara Bo
nilla, a week earlier, and needed protection and asylum until the
furor. died down. 44 Noriega told associates £tiat the cartel paid be-
tween, $4 million and $7 million for Noriega's protection of mdivid^
rials in the Cartel during this period. 45 ■ ■ -'

... However by . mid-May, Noriega became concerned about'the pres-
sure lie was receiving from U.S. law enforement personnel, concern-
ing the cocaine processing plant he had allowed the cartel to estab-
lish in Darien, Panama. 46 Now that he was harboring the cartel

4I Blandon,Part2,Feb. 9, 1988, pp. 88, 101-102. ■ ■ '-■

4 2 Subconmuttee -testimony, of Carlton,- Part 2, February 10, 1988, pp. 188-190.'- . s

43 Subcommittee testimony of Carlton, Part 2, Feb.-i0, 1988,' p. 191v- ,: '• Jv -

44 Subcommittee testimony ofBlandon, Part 2, Feb. 9, 1988; pp. 101, 103; Carlton, Part 2... Feb.
10, 1988, p. 197. -----

"Blandon, ibid., pp. 101, 103; Carlton, ibid., pp. 197-199.
46 Carlton, ibid., p. 199.

87

fense forces to conduct rtrf f til allow the Panamanian de-

ed, and the Panamanian ^ gdveL^n?*dr?nn^ — 6 ? eport ^

.against the cartel's employfes. 4 ^ ^PPed the criminal cases

Noriega's U.S. Partners

One American partner of General Norieea wa^ ^p Rif,o, it v t.

making Panama avStblfto narcotil £Sffi£ Mr & Norie ^ were
base, permitted the drug traffickers^ 3w e Panama as its

cos^^ett™ ^ios Turisti-

«Sf rlt i >n ' ^7 BJand °n- ibid., pp.101-106.
* 8 Blandon, ibid., pp. 101-102
49 Blandon, ibid, pp. 101-106

1988,^4^ ° f **" ^ Senflte *~ * Snbcon^ttee on InvestigaKons, Jan 28
"Ibid, pp. 5-8.

88

In return for such favors, Noriega . provided the Kalish drug
smuggling organization with military protection ,and favorable
treatment. Kalish himself received, three Panamanian passports,
including one , Panamanian diplomatic passport., Noriega continued
to work , with Kalish- in: drug smuggling operations until Kalish's
arrest and incarceration in Tampa, Florida on July 26,. 1984. 52

" U.S. Knowledge of Noriega's Activities

As a cdnsequence of the'NSG's decision: to prohibit GAO investi-
gators from receiving information regarding US policymaking on
Noriega and narcotics, the Subcommittee cannot definitely deter-
mine what U.S. agencies knew about Noriega and when they Itnew
it. (The GAO's report to the Subcommittee Chairman regarding the
status of its inquiry, as well as a chronology of the GAO's^att'empt
to reach agreement with the Various agencies of the U.S." govern-
ment in compiling the information oh General Noriega requested
by the Congress, are included as 'an' appendix to this report.)

However, it is clear from the testimony of a number of witnesses
before tHe Subcommittee that Noriegas activities hi ; connection
with narcotics "had become widely known within L£tin America by
the mid-1980's. 53 " ;.,

This knowledge extended to some of Noriega's political opponents
in Panama. By 1984,, a prominent member of the- Panamanian op-
position, Dr. Hugo Spadafora, began to publicly criticize Noriega
for working with Colombian traffickers in the- narcotics business.
Subcommittee witnesses testified that Noriega arranged iii re-
sponse, to have Spadafora torture*! and murdered by members of
the Panamanian Defense Forces in September 1985; The involve-
ment of the PDF-iwas confirmed by a number of sources, including
Noriega's: personal' pilot, Carlton and; JJlandoik The murder>of 'Spa-
dafora focused further attention in Panama on Noriega's - involve-
ment with narcotics and related activities. 54 • :<

The^most detailed^ a'ccount of the evolution of U.S. policy toward
Noriega provided the Subcommittee came from Francis J. McNeil,
a career State Department official -who had been Ambassador to
Costa Rica from 1980 through 1983 and Deputy Assistant Secretary
of the Intelligence and Research Bureau at State.

According to McNeil, the State Department never trusted Nor-
iega,, referring tQ him "early oh" as ■■■ the rent-a-colonel, in tribute
to his ability to simultaneously milk the antagonistic intelligence
services of the United States." 5 5 - '■

McNeil characterized Noriega's relationship With American in-
telligence agencies as too "cozy," leading our intelligence agencies
to depend on- him and Panamanian intelligence for handouts, and
treating Noriega as>an allied service. McNeil stated that the conse-
quence was that the U.S, took a "see no evil approach" to Noriega,
which was a "true intelligence failure, the accountability for which

fi2 Ibid.

"Subcommittee testimony of Ritch, Part 2, pp. 65-69; Blandon, Part 2, pp. 112-113;-Camper,
Part 4, pp. 292-293; see testimony of Dr. Norman Baily, House Select Committee on Narcotics
Abuse and Contril, March 28, 1988, pp. 5-8. ■- -

E4 Subcommittee -testimony of Floyd .Carlton, Part 2, Feb. 10, 1988, p, "202; McNeil' Prepared
Statement, Part 3,'p.'32& 1

55 McNeil Prepared Statement, Part 3, p. 318. ^ v

89

rests with the intelligence folk who had become Norieea's cli-
ents." 56 &

McNeil described how in 1980 the U.S. was aware that Cesar Ro-
driguez was engaged in smuggling guns to Salvaddran rebels while
smuggling drugs to the U.S. The U.S. complained to General Torri-
jos, who in turn ordered Panamanian officials to "knock it off."
The consequence was "a ammunition of Panamanian involvement"
until Torrijos' death. 5 7

According to McNeil, the Spadafora murder and the exposure of
the involvement of a PDF officer in cocaine trafficking "had upped
the pressure oh narcotics," although the US still had not confront
ed Noriega directly on these problems. 58

„ Ori J June 13, 1986,^ a lengthy article appeared in the New York
Kmes describing Noriega's narcotics trafficking, quoting unnamed
White House and. Administration officials. After the article ap-
peared, the State Department commissioned an investigation of the
charges, which concluded that Noriega ran Panama, that Noriega
was corrupt, : and that "we know for certain PDF officials are in-
volved in the cocaine trade but we don't have that evidence on
Noriega. According to McNeil, the analysis" recognized that "not a
sparrow falls [in Panama] without him taking a feather," and that
Noriega has to know [about the drug trafficking] and is likely set-
ting a share." 59 - -

McNeil testified that, a formal policy review took place shortly
thereafter in 1986. The participants in the review included the
^^S 3 - Jtesi 01131 Interagency Group, and representatives of the
CIA, State . Department and Defense Department At the meeting
several of us suggested in different ways that the Noriega issue
wasnt going to go away if for no other reason than narcotics"
However, after the meeting, "a decision was made to put Noriega
on the shelf until Nicaragua was settled." 60

Assistant Secretary of State for Inter-American Affairs, Elliott
Abrams, in a public statement, subsequently denied McNeil's asser-
tion that the U.S. delay responding to the Noriega drug problem
because of Nicaragua. •'

Other US officials who testified before the Subcommittee gave
conflicting accounts of when the U.S. first had information about
Noriega s involvement in narcotics.
- According to a DEA agent based in South America, the U.S. first
received reports linking Noriega and narcotics before 1978 61 Ac-
cording to' this official, Col Noriega and Gen. Omar Torrijos were
then seen visiting Medellin where they were met by drug traffick-
ers. This trip 'and subsequent trips to Colombia by Noriega and
Torrijos were reported to DEA headquarters. 62

By 1980 or 1981, according to Nestor Sanchez, the CIA liaison for
Central America, U.S. officials were aware of "rumors" that the
Panamanian Defense Forces and government officials were in-

5a Ibid., p. 319.

57 McNeil Prepared Statement, ibid, pp. 320-321.
SH McNeil Prepared Statement; ibid, Vol 3, p. 323
59 Ibid., p. 323.

fi0 Subcommittee testimony of McNeil, Part 3, April 20, 1988 p 42

61 Deposition of Thomas Cepeda, Part 4, April 21, 1988, pp. 729-730

62 Ibid.

90

volved in-narcotics trafficking, but that there; was no hard' evidence
to confirm the rumors as fact. 63

.While Noriega was aggressively: expanding his \ criminal, enter-
prises^he U.S % . was. apparently unable to make any farther
progress ^determining jirbe&i&'.fbiB "rumors" were, true or false,
according, to General' Paul' Gorman, .former .(^ipmaiider in chief of
the. United States Southern. Command.- Gorman told the Subcom-
mittee that after he assumed his position in Panama. in .1983, .he
specifically tried to find out. whether the rumors about Noriega's
criminal involvement were true, and was . unable to establish that
Noriega %as committing any Crimes.. (Gorman testified that he had
been 1 assured by the U.S. Embassy in Panama that Noriega was co-
operating with American efforts to .combat narcotics' trafficking.
Gorman • contended that he only learned of Noriega's personal in-
volvement in laundering narcotics money in 1986 ? upon reviewing
a report- of the President's Commission on Organized Crime. 6 ^

A different 'assessment was provided by, Dr. Norman Bailey, a
former senior staff member of the National Security Council under
President Reagan between- 1981 and 1983. In testhnpny before ; the
House Select Committee on Narcotics, -Drl Bailey stated that at the
time he was at the 1 NSC there already existed "available to any au-
thorized official of the U.S. government . . . a plethora ; of human
intelligence, electronic intercepts and satellite' arid overflight pho-
tography that taken together constitute[d],not a -^smoking gun' but
rather a twenty-one cannon •barrage' of evidence" of Noriega's in-
volvement in crinimal- activity and drugs. 6 , 5

Dr. Bailey testified that "in. connection with his duties and in col-
laboration with the White House Office of Drug Enforcement'' he
discovered while at the NSC that "the Panama Defense
Forces ; . . . and its high officials have been extensively and direct-
ly /.engaged, in or engaged in aiding,and abetting'' drug trafficking
to the U.S., gunrunning to the Sandinistas, Contras, Salvadoran
guerrillas,- the M-19 and PARC in Colombia, illegal technology
transfers to the Soviet bloc, and money laundering. 66 n

According to the DEA, between 1970 and 1987,- Noriega's name
appeared in more than 80 different DEA files. 67 However, there
were no follow up investigations as these references were not cor-
roborated, but were typically "third party or hearsay information
which we cannot pursue very well," 68 Less than eight weeks before
Noriega was indicted, Drug Enforcement Agency Administrator
John Lawn told Admiral Murphy that no indictment would be
issued because there was insufficient evidence against Noriega. 69 .

William Von Raab, the Commissioner . for the Customs , Service
testified before the Committee that his organization had evidence
linking General Noriega and^ narcotics trafficking as early as
1983. 70

63 Subcommittee testimony of Nestor Sanchez, July 12, 1988, p. 195:
S4 Subcommittee testimony of Paul Gorman, Part 2, pp. 38-39.

65 Bailey testimony. House Select Committee on Narcotics Abuse and Control, SCNAC-10Q-2-
3, "U.S. Foreign Policy and International Narcotics Contro— Part EI," March 29, 1988, p. 79.

68 Bailey, ibid, pp. 5-6.

■ 61 Subcommittee testimony of John C. lawn, Part 4, p. 141.
6a Subcommittee testimony of David Westrate, Part i, p. 141.

66 Subcommittee testimony of Admiral Daniel C. Murphy, Part 4, pp. 239-240.

70 Senate Foreign Relations Committee hearing to review the President's Annual Internation-
al Narcotics Control Strategy Report, March 14, 1988, p. 95.

91

In April, 1986, Senator Jesse Helms, as. chairman of the Western
Hemisphere Subcommittee, held hearings on Panama wl^h pro^

^TT^**?^ ab x? Ut traffi cking by PanamS^
ficials, lii those hearings, Norman Bailey, a former Reagan NSC
staffer testified publicly that Noriega was "widely susfeTted of
drug dealings" and that the Organization of American States
needed . to meet to restore constitutional government ^ PananS
P?oble e m " e ga m t0 reSP ° nd to Panama ' s Sowing drug

During those hearings, Raymond J. McKinhon of the Drug En-
forcement Agency testified that the United States, knew that
Panama was becoming a money laundering center, a transit coun-
™»>t«* en route from South America to the United
a transxt country for precursor chemicals, principally ether
used for the production of cocaine, and a center for the local culti-
vation of maryuana ™ Then-Assistant Secretary of State Elliot
Abrams further testified that the United States also was "aware of
and deeply troubled by persistent rumors of corrupt, official in-
volvement of Panamanians in drug trafficking 73

Following the hearings chaired by Senator Helms, a number of
press accounts provided further information regarding Norieea's
narcotics^ted corruption beginning with the front,p^ The
article on June 12, 1986, which quoted officials in
+w^f g ^ Ad^^ation^and past 'Administrations as stating
that they had overlooked General Noriega's illegal activities bl
5to 6 ?l ™ cooperation with American intelligence.™ By January
^Ii3 e ^er^ Digest cited "U.S. official and PanarSaS

f^^^^^^V^ 5 a ke 7 figure m international
drug trade Writing for the Digest, David Reed quoted "experts"

ffi^?!f u hat " None ga.and other PDF officers have received mil-
hons, of dollars for permitting the traffic to continue." 75

; Why Did the U.S. Fail to Respond To Noriega Allegations?

vThe hearings chaired by Senator Helms established publicly that
there was a significant body of evidence pointing to Noriega's in-

1986 e Tr ^fri^ ^™ de W ^dnig trafficking as of early
1986. Yet, .the U.S relationship with Noriega continued to be a
close one up until the moment he was indicted by the U S

There were differing explanations for this failure to distance our-
selves firom Noriega earlier than we did.

The former operations chief of the South Florida Drug Task
Force, Admiral Daniel Murphy, stated that information about Nor-
iega was received by lower-level government officials, but not -
passed on to policy makers. According to Admiral Murphy, the al-
K 10 -f i,'- Y TP* considere d that critical that they should

portlda? lowerllvS"- they were probfably re-

^^afSS^SS^ ^ F ° reign WeSteni Hemi ^~ Subcommib

" a Abr^^bid, f p a 4 : a 10nd J ' i4cKinn0n ' AdmiDistrat «, DEA, idid, April 21, 1986, p. 43.

"Seymour Ke^ach, The New York Times, June 12, 1986, p. A-l
73 Reader*s Digest, January, 1987.

78 Subcommittee testimony of Admiral Murphy, Part 4, pp. 240-242.

92

A different view was taken/by former NSC staffer Bailey and by
Ambassador McNeil.
According to Bailey:

Clear and incontrovertible evidence was, at best, ig-
nored, and at worst, hidden and denied by many different
agencies and departments' of the Government of the
United States in such a way as to provide cover and pro-
tection for [Noriega's] activities while; at the same time, '
assuring that they did the maximum damage to those very
interests that the officials involved were sWorn to uphold
and defend. 77

Ambassador McNeil stated succinctly that the United States was
"coddling . . ; Noriega beyond any time when one could reasonably
doubt Noriega's involvement in drug trafficking to the United States
because he was helping the United States with the Cbntras. 78

Bailey and McNeil's view is .corroborated in part by the factual
admissions made by the United States in the trial of Oliver North,
in which the United States revealed that Noriega had provided
Contras on the Southern Front with $100,000 in July 1984,. as well
as by other Admissions in the North trial discussed below. 79

United States law enforcement agencies also considered Noriega
to be a: friend of the United States, a belief largely based on the
significant amount of information and assistance Noriega had pro-
vided United States agencies ' oyer many years. ^his View was ar-
ticulated by DEA Administrator Jack Lawn, who .nv'Jhe ?past had
written Noriega letters, of comfcndatipn ifqr his'hefpiui'ri^fing'the
war. on drugs. 80 In a May 8, 1986 letter to Noriega,, , Lawn stated
the DEA's ' deep appreciation for the vigorous anti-drug trafficking
policy that you have adopted, which is reflected in 1 the numerous
expulsions from Panama of accused traffickers^. • -" 81

Lawn testified before the Subcommittee that the DEA hadhad a'
long-standing, cooperative relationship with the Panamanian De-
fense Forces in the areas of crop eradication, narcotics investiga-
tions, money laundering and drug interdiction. Lawn stated that
"our narcotics efforts in Panama continue, despite;the corrupting
and ^mtirnidating influence of drug trafficking on government offi-
cials and institutions." 82 Lawn stated unequivocally that DEA had
been granted every single narcotics request ever made to the Pana-
manian Government. 83 ■

In fact, according, to Blandon, while DEA Administrator Jack
Lawn was referring to Noriega's liaison to the DEA, Luis Quiel as
"integral to the success" of fighting international drug trafficking,-
Quiel was serving as Noriega's enforcer to eliminate competitors of
the Medellin cocaine cartel by turning them over to the United
States. 84

77 Bailey testimony, House Select Committee on Narcotics Abuse and Control, SCNAC-100-2-
3, March 29, 1988, p. 5.

78 Subcommittee testimony of McNeil, Part 4, p. 42.

79 Agreed upon statements of fact, United States v. Ndrth, DC District Court, 1988.
ao Letter from John C. Lawn to General Manuel Antonio Noriega, Part 2,'p. 393.
81 Lawn-Noriega Correspondence, May 8, 1986, Part 2, p.' 391. ' .

aa Subcommittee testimony of Lawn, Part 4, p. 112.

83 Ibid., p. 122.

84 Subcommittee testimony of Jose Blandon, Part 2, p. 122; letter from- John G. Lawn to" Gen-
eral Noriega, May 27, 1987, Par£2, p. 391. - ■■

93

smugglers about whether or not their planes were on a DEA watch

™ £ *?, rea ^ Carlton by telephone after his hfitial mlethils W

r&'rt k office m Miami. When, the informant arrived
Svelte" - d a? El ^

M a v5?7 A diranistrator--Lawn wrote Noriega as- late as

May 27^1987 to assure him that "DEA has long welcomed on r

such cooperation wa^ highlighted whenSnf of thfpSciW dffend
ants identified by the Justice Department as EduJrdo Martmel of
Medelhna and the cartel's chief money-launderer in
caped-from the PDF after being tippedW tc Xe ptaS&t»

"Kalian testimony. Senate Permanent Sntarnmittee on Investigations, January 28, 1988, p.
** Subcommittee testimony of Carlton, Part 2, p. 211

- B. lb***. A* March 30, 1989, -ffin£S£ftS j m Drn* Money-Lanndering."

94

Mixed Messages

The tension between law enforcement and foreign policy objec-
tives appears' to have led to a series of mixed messages being sent
Noriega from various Branches of the U.S. government. This prob-
lem became acute in 1985, a time when Noriega was worried that
the U.S. might respond to his continuing criminal enterprises. "

According to testimony before the Subcommittee, Noriega recog-
nized that the war being waged by the Contras against the Nicara-
guan government was the Tughest priority of many members of the
Administration in Washington:' Iri'^acc&r'daiice ;witE£hig" , past- han-
dling of U.S. official Noriega sought to assure the United States;
he would cooperate. 90 '

According to Jose Blandon, Noriega met with Lt. Colonel Oliver
North in June 1985 on a boat anchored off Panama City to discuss
Panamanian cooperation with the United States in the conduct of
the war against Nicaragua in the- period when U.S. intelligence
agencies were prohibited by the Boland Amendment from "directly
or indirectly" supporting the Contras. Blandon testified that this
meeting led to : an agreement by Noriega to help train Contra
troops and to 'permit -Contra, leadership to enter < and exit Panama
freely to fiacilitate the conduct of the war. Blandon testified that
during a second meeting between Noriega and North,- Noriega-sug-
gested the Panamanian units could be used -in operations" 6n Nica-
raguan territory. 1 However; Blandon had no information that Nor-
iega took action -in-Tesponse to North's request. 91

According to McNeil, following the meetings with North, Noriega
met with the late CIA Director William Casey on November jI,
1985. A. memorandum Casey wrote after the meeting, suggested
that Noriega left "reassured.". The narcotics issue was jio't men-
tioned. Casey, justified his failure to raise the issue in his; discus-
sions on the ground that Noriega*. was providing valuable support
for our policies in Central America,' especially? Nicaragua- Casey be-
lieved that Noriega understood the U.S. opposition to drug related
corruption and that the issue.could best be left for the ILS. Ambas-
sador to Panama to handle. However, other U.S. officials concluded
that Casey had "let Noriega off the hook." 92 : :

Following the Noriega-Casey, meeting, the 'U.S. ambassador to
Pana m a, Everett Briggs, complained that Casey had given Noriega
the wrong signal, and NSC director Admiral John Poindexter was
sent to Panama to "upbraid" Noriega on the narcotics issue a few
weeks later. 93 . . _ • '

On December ,17, 1985,, Noriega met with Admiral Poindexter
and Ambassador Briggs. Blandon testified that after the meeting,
Noriega gave him the following version of what happened: Poin-
dexter told Noriega that a group of military officers would have to
be sent out of the country because of their involvement in the Spa-
dafora murder and that Noriega should reconsider returning Nich-.

„ so See e.g. Subcommittee testimony of Jose Blandon, .Part %, pp. 158-163: McNeil Prepared
Statement, Part 3, p. 325.

6 ? Subcommittee testimony of Blandon, Part 2, pp. 158-163. ■

93 Subcommittee testimony of McNeil, Part, 3, April 4, 1988, pp. 101-102;- McNeil Prepared
Statement, Part S, p. 323.

83 McNeil Prepared Statement, ibid, p. 323.

95

Blandon testified that while Noriega was meetiner with P«m
Cents' fo^W?*' & Sraa ? °JS- S - wSS^L^^S

MS

However, the message was received^* Sn^KX" 3 *^

SfcSo^ a » d t0 - WOTt those ay who h0 ^e 0

<?t^«^i? ay a}S ° , h ^ e bellCT ed his problems with the United
States had been resolves as the result of a quid pro quo with

A^i^T^ 0 ? f ? r .^ support.for the Contra^ *

Scoitrre r ernm 4k in ™ s SfiK^s

clean up Noriega's v image and a commitment to lift Se U I W ™

No^gAad nXts^ei in™p?a£ P n? N^T
l3tL C °£ d M0 » m P lish many .essential things, juntas NoriJS
had helped the previous year in blowing up a fcMLta is?

According to the Agreed Statements in the North trial AHmi™l '

^Subcommittee tefitimony of Blandon, Part 2, p. 162.
9a Ibid/

" Agreed statement #97, US. v. North, DC District Court, 1988.
fle Agreed statements, #99, U.S. D . North, ibid.

96

al, in London hi late September 1986. At that time, Noriega agreed
"to take immediate actions against the Sandinistas and offered a
list of priorities^ including an oil refinery, an airport, and the
Puerto Sandino off-load facility." 100

The problem of mixed messages continued as the United States
moved closer to indicting Noriega. As late as November,. 1987, Nor-
iega still believed he had a second channel open to him which
would support for him and his operations. 101

Noriega's belief was based in part upon two trips Admiral
Murphy made to Panama in 1987. Murphy visited Noriega in
August and November, 1987, accompanied by Tongsun Park, and
discussed what Noriega might do to improve his relationship with
the United States. 102 Murphy said he made the trips as a private
businessman. However, before he went to Panama, he met with top
officials of the CIA, State Department, Department of Defense,
NSC and Vice President's office, including Assistant Secretary
Richard. Armitage at Defense^ Assistant Secretary Elliott Abrams
at State, then NSC director Frank Carlucci and the Vice Presi-
dent's National Security Advisor, Donald Gregg. -When he returned
from Panama, he debriefed these U.S. officials as well. 103 >>

While in Panama, Murphy met with Nbriega and with the Pana-
mariian opposition. He advised Noriega of the ^hostility toward Mm
in the United States and the Administration, and explored .what it
might take to improve the atmosphere with the United' States.
Murphy testified that he made^ recommendations to Noriega re-
garding the steps he could fake to : improve US-Panamanian rela-
tions. The steps -included turning government functions over to ci-
vilians, having fair and free elections, and meeting with the opposi-
tion. Noriega 5 replied that Panama already was controlled by Civil-
ians and that elections were established by" law. Murphy felt that
Noriega was inflexible, and after meetmg^with equally -implacable
opposition leaders, he concluded l^t "^everybddy was -in deep
cement," and there was very little business opportunity for liim. 104

in'November 1987, Murphy reiterated his concerns and suggest-
ed that" Noriega relax his control of civil liberties as well. There
was no discussion of the TJ.S. Government's concern about Norie-
ga's drug trafficking at eithef meeting. 105

Murphy testified that his trip was made as a. private citizen look-
ing for business. 106 But according to Blandon, Noriega interpreted
his visit as a message from the United States Government. Noriega
believed thkt Murphy was casing the message\that if he adopted
the proposed plan of reform he could remain -in power until Febru-.
ary 1989. 107 , .,, • , "

Referring to the series of mixed messages sent to. Noriega, former
Deputy Director of the Department of State's Intelligence ( and Re-
search bureau, Frances McNeil, summarized the. situation by s$at-

100 Ibid, #106.

101 Blandon, Part 2, pp. 173-176.
"a Murphy, part 4, pp. 245-256.
io3 Murphy, ibid, p. 246.

10 * Ibid p. 247.

106 Ibid pp. 248-249.
ice ibid p . 245.

107 Blandon, Part 2, pp. 173-174.

97

n^lf * he D ?S art ^nt of State was attempting to distance

rtstff from Noriega, the Department of Defense emdCIA weres?
multaneously sending him encouraging signals. 10 *

Conclusion

T.nW 61 "? 1 ^ 0 " 6 ^ P™™ 1 ? 3 th e best example in recent U.S foreign

9rlS + 0 ^^^? 0rei ? n i eader * able to manipulate the Unitod
States to the detriment of our own interests. unitea

..General Noriega recognized that by making himself indisnensible

to various U.S. agencies, he could develop U.^ents^whrwould

become dependent on.him. As a result, they would be reluS to

pursue mteUigence on Noriega's criminal activities and less Ifcelv

to mvestigate what intelligence they did receive y

Noriega also understood the divided nature of the U.S Govern-

~1e hp tt ^ ed f^ + Play 6a - Ch off a ^ st the otheS For

tS fu nfe t6d t0 ma ^ 1 P ula te.the DEA office in Panama by
* officials cases and providing information leading to ar-

a res^S DEA fo^n^ ^ ^ n0t ^ his dru * DPmtgiE As

sS^^

9^^+^^ 1*°?^?* that 30 l 011 ? as be helped the United
SSw^S 1 ^ ^st diplomatic priorities, as Torrijos had done
wxth the Panama Canal, the United States would W to overlook

l^tiiS^J^^^ W U^,prioritf e rin%^ er S
iysu s, this meant that our government did nothing reearoW Nnr

hf w Uff - bu ? ni,BB ^ s S bst ^ ia l criminal mvolvemSfbe^ause
the first priority was the Contra war. This decision resulted in at
least some drugs entering the United States as a hidder f^rt o?the

t.j 0 u - s - Geneeal Accounting Office

Wahonai. Security and International Affairs Division
Hon. John F.Kerry Washington, DC, December 6, 1988.

srjsess them "^ dew -^"fet 1 ,;

108 McNeil, Prepared Statement, Part 3, p. 322.

98

rAlthoiigh we do ne-t necessarily agree with the bases for the administration's ob-
jections, we- believe it is unlikely that we could obtain the necessary cooperation
from the administration to conduct this review and succesBfuUy^pursu& ( the original
objective of this assignment.

As discussed with your office, we are terminating our work on this assignment
and will reformulate the assignment objectives to review the development, imple-
mentation,, and enforcement of the economic, sanctions -imposed on Panama by the
administration. 1

We have sent a similar' letter to Representative Bill Alexander whb also nfcfl
asked us to review information concerning General Noriega.

If you have any. further questions concerning: this -assignment; -please do not hesi-
tate to calt'on us. ■ - -■ ' ,
. Sincerely yours, -' >

..V , ' . ". Nancy R.: Kingsbury, '

- Director, Foreign Economic Assistance:

U.S. Department of State,
> - . Washington, BC, August 2, 1988,

Nancy Kingsbury, " ■• .-■

Associate Director, General Accounting Office, National Security and International
Affairs Division, Waskingtdh, DC

Dear Ms. Kingsbury. I am pleased to respond to your July 12 letter on the pro-
posed case study your office is undertaking about how U.S. government agencies
used information about General Noriega -in its policy decisions regarding' Panama.

As you are aware, the National Security Council staff and the "office of White
House Courisel have been working closely with your office on- this investigation:-' All
executive branch agencies have been instructed by,the White House not to take, any
action on your request until various legal issues have been analyzed by the Admin-
istration. Accordingly, at the present time it will not be possible, for the Department
to meet with your staff or produce information until this examination is completed,
for the time being, Nicholas Rostow, Legal Adviser to the National-Security Council,
is acting as the administration's point of contact on this matter. H
Sincerely,

^ Rpger B J; Feldman, .

' " ' " Comptroller,

National Security Council,
Washington, DC, July IS, 1988.
Ms. Nancy R. Kingsbury, .

Associate Director, National Security and International Affairs Division, U.S. Gener-
al Accounting Office, Washington, DC

Dear Ms. Kingsbury, I am writing in response to your request concerning a
study of the alleged drug activities of Manuel Noriega, and the role information
about such activities played in decisions about U.S. foreign policy (Study #472165).

As described in Mr. Kelly's May 13, 1988, letter to Paul Stevens and your June 23,
1988, letter to me, your request seeks access to sensitive law enforcement and intel-
ligence files covering a substantial period of time. In our meeting, your staff con^
firmed: that your three areas of interest were intelligence files,, law enforcement
files, and the deliberative process of the- Executive branch, including internal con>
munications and deliberations leading to Executive branch actions taken pursuant
to the President's constitutional, authority. I was disappointed that your letter did
not contain any narrowing of the request. The request raises important statutory
and constitutional issues. The Administration is analyzing them now, and when its
deliberation is complete, I shall reply further to your letter of June 23, 1988.
Sincerely,

Nicholas Rostow,
Special Assistant to the President
and Legal Adviser. '

99

, T U.S. General Accounting Office,

National Security and International Affairs" Division,

„ T ' Tr Washington, DC, August 8, 1988.

Hon. John F. Kerry,

(Taiwan, Subcommittee on Terrorism, Narcotics and International Operations
Committee on Foreign Relations, U.S. Senate, Washington, DC. ^rations,
Dear Senator Kerry. In March 1988 you asked us to review how informati™
S/S^^fT^ W-level government officials of nXitoSdtytoS
£^,t?S^ ^^U-S- foreign pohcy decisions. Because the information required
wS^W undertake this assignment would potentially involve irrformatiorT ri
£ffit$ ^telhgence gathering and on-going law enforcement investigations which S

££5?,^ ££"1 r SWf 64 ^ d y° u ^ed, that we would eSplorf the Sue
using as a case study the information concerning the drug trafficking activities^
General Noriega of Panama. The following is a summary of the expSence we have
had so far in satisfying your request. ..

reftS JXV 98 ^ 6 ^% b £ 6n . fOT paUy ***** to gain access to personnel and
records at the Departments of State, Justice, and Defense. We were successful in
gaining access to: the Department of Defense and in fact perform^ f Hmited

al becunty Council (NSC) would serve as the Administration's focal point on this
assignment. Concurrently, we were advised that the Departments of Justice and

PAH J^w**"^ n< ? t0 . me ^ h ^ GA0 staff or P™*M* any informaSonT
2P ^^ignment untJ NSC issues .guidelines concerning GAO access to in-

f^SS" W!, De ^ ment ° f Defeni3e notified ^ on JuJ y 12 > 1988, that it^lso w^s
mstructed by the NSC to cease bperation with GAO until such guidelines are aS
able. We have by letter and telephone discussions continued to try to obtau? frfor-
h^tffW meetings with the Departments of State, Defense, and Justice
the rtion e Kfus2 * ^ **** the NSC ' E Section 2

We have been working with "the NSC to facilitate access to agency personnel -and
records. We met with them on June 6, 1988 and June 22, I9E, 2.d Sc^Sd^t

^Tnf^ °- Ur aPPr0a ^ *° ^ w ? rk ' o** about our acce^ to So?

and our previous experience on other successful assignments involving simflarlv
sensitive mformation On June 23 1988, at NSCs request, we deliveSd a dSed

f .l5ffi^ r SS 8 ? ° n th f ^ of formation we would be seek-
mg Although that letter identified some information which ultimately may not be

rtStS?^ the ^™ faon elated to^the primary focus of our work, that if
the organization and decision process for foreign policymaking when information is"
available on foreign officials' drug trafficking,- would not uniformly be exited to
raise similar concerns. Our normal procedures in such situations are Knsider
access questions on a case-by-case basis, following discussions with agency offSS
and examination of otherwise available records. NSCs actions to profibit such
WalS^roach' 11 ^ ^~cemmg access ar^ established E
On July 13, 1988, the NSC wrote in response to 1 our June 23, 1988, letter that our
ZhXLT^T B ^ SB ^ ltlV % ^ W . enfor .cement and intelligence files covering a
Su^ S P P wl ^ e ',^d "raises important statutory and constitutional
issues. The letter advised that the administration is analyzing those issues and
would reply when its delAerations were completed. We have on several oJcSiS
most recently today asked the NSC about the status of the operating Adelines We
continue to be told the issues are being analyzed'and guidelines wflffifcSS when

t^SSS^S^ 0 officlals ^ thraot provide a to 3=

« W f ^ 5? mon ^ h °l our effort t0 addr ess the issue you asked us to

review, and it is difficult to predict how much further delay is likely Although we
have assembled some information available rromrpublic records, we have made S
sentiaUy no progress on the audit itself. We be! eve it should be possible ?o reaSi
agreement witii the agencies involved, as we pursue our audit questions that Such
of the information we need to examine should be considered to be releaskble a?d to
discuss special arrangements for security of the information if such arraSemenS

i^Stt^E^ff successfll1 tt ™ h - ~ h

A Heta^ed chronology of our efforts to^meet with NSC and agency officials and to
obtam information, is proved in ^closure I. Copies of the letterfwfSnltoNSC
1988 aSd JuK^? f9 6 8« P w 4ed m ^^ n. Tte NSC res p 0 nses to our June 23,
198B and July 12, 1988 letters are in Enclosure IE; the CIA denial to our request for

100

access is in Enclosure TV; and. the Department of Defense response to our July 13,
1988 letter, along with NSC instructions to all agencies, is in Enclosure V.

We are currently awaiting the NSC guidelines. We will continue to keep you in-
formed of the status of our efforts, and will discuss further steps which we believe
may be appropriate, if any, after we have reviewed any guidelines' issued by NSC.
Sincerely yours, '■'

Nancy R. Kingsbury,

. Associate Director.

{Enclosure I]

Chronological Summary of GAO Contacts With Executive Branch: Agencies

and Officials

May 11-16, 1988. — We sent routine notification > letters to the Departments of
State, Justice, and Defense, and the National Security Council advising them of our
review and identifying the subject and scope of our work. Letters were sent specifi-
cally within the Department of Justice to the Drug Enforcement Agency (DEA), the
Executive Office for-U.S. Attorneys, and Justice's Criminal Division,

May 23, 1988. — We received our first response from the NSC. Mr^ Nicolas Rostow,
Special Assistant to the President and Legal Advisor, told us by telephone that he
warrf^ *■■•> "think ahmit it". before scheduling a meeting with us.

May 24^ 1988— We sent a notification letter to the Central Intelligence agency
asking for a meeting to discuss the issues.

. May 30-June 1, 1988. — We began contacting personnel at State jind.Justice to ar-
range for initial meetings to discuss the scope and depth of our audit. Mr. Ma n uel
Rodriguez, U.S. -Attorneys Office liaison who was coordinating the Justice Depart-
ment components, declined to set lip a meeting,stating that NSC-was coordinating
the Administration's Tesponse to our notification and he was going to wait until he
heard from NSC before proceeding. Mr. Bob Harris, from the Department of State,
advised ua that State would not deal with us. on this assignment until we had dis-
cussed our-work with the NSC. . \, . '_

June 1. — We conducted our in itial meeting with the Department of Defense, We
performed work at the Defense Intelligence Agency (DIA) and the military depart-
ments untiljuly 12, 1988. '-"

June 6, 1988.— We had our first meeting with Mr. Dan Levin, Deputy Legal Advi-
sor, NSC. Mr. Levin stated he understood the purpose of . our review, but wasn't sure
we could have access to sensitive, intelligence or law enforcement files. He promised
to discuss access with the agencies involved and would get back to us quickly. We
were officially notified that NSC would be our focal ppint on this assignment. We
advised Mr. Levin that we preferred to deal with the agencies directly without
having to clear everything with the NSGr-our normal practice. Mr. Levin, stated we
are free to deal with each agency directly and that NSC. would not be a bottleneck.

June 8-9, 1988 —We again contacted the Departments of State and Justice, to ar-
range for initial meetings. Despite Mr. Levin's statement that we could deal directly
with the agencies, both Mr. Harris at State and Mr. Rodriguez at Justice advised us
the, NSC instructed them not to deal with us until NSC had developed operational
guidelines on what to do and what .not to do on this assignment."
' June 13, 1988. — Mr. John L. Helgerson, Director of Congressional Affairs, CIA, re-
sponded to our notification letter. He stated that all- agency activities in Central
America and information it gathers "is under close and continumg scrutiny by the
House and Senate Intelligence Committees. Furthermore, the CIA advised all policy-
related questions should he directed to the appropriate components of the Executive
Branch. It stated that tnereforelt could not be of help to ils.

June 15-16, 1988.— We ,began efforts to contact Mr. Levip, NSC, to determine
when the NSC guidance would be issued and we could continue our review. Mr.
Levin requested another meeting to learn more about the review.'

June 16, 1988.— We conducted.an initial meeting with representatives of the Cus-
toms Service., Mr. Bill Rosenblatt, Assistant Commissioner for Enforcement, did not
provide any information and said he wanted first for the U.S. Attorneys Office to
establish ground rules as to how much of the information Customs has is covered by
grand-jury secrecy provisions and what information they can provide to us.

June 22, 1988.— we held a second meeting" with the NSC and White'House staff
personnel. Attending for the Executive Branch were Mr. Nicolas Rostow, Special As-
sistant to the President and Legal Advisor; Mr. Dan Levin, Deputy Legal Advisor,
NSC; Mr. Jonathan Scharfman, Assistant Legal Advisor, NSC; Mr. Dan McGrath,
Legal Counsel, White House Staff; Mr. Bob Harris, Department of State; and an-
other official from the Department of Justice.

101

We reiterated our purpose, and our requirements in terms of access to personnel
and, documentation to the extent that we could.. We explained that we needed to
S dU fth mit ^n m ^^ m ° re my determine our do?umer!£to nl^We d£
cussed the availability -of documents used in the deliberative process, grand jury and
other enforcement actions foreign intelhgence, and other types of SSnenSto
Some were considered to fall under executive privilege and not available to GAO
according to. the ^administration officials. We discussed in general terras our access

SS^^ 111 ^ ^ ° f * assignments and iwmtod?utSat?S

ciaj security arrangements could be agreed.upqn if_ circumstances warrant
B l the re 5 uest of Mr- Levin, we agreed to submit in writing a more detailed expla-
nation of the specific types of documents and information we wanted access to so
they could more fully consider our request. They promised a prompt respoSe We

t^tec^Speri^ " ^ ^ ^ ^ ^ ?o —

men?^

(1) Obtain agency briefings that describe the general organizational structure
and the operational procedures related to the agency's data collection, analysff
and dissemination systems; . J '

(2) Interview relevant agency personnel who are responsible for definine

SS^? 011 ^ ^ "Sa" 1 to Gener al Noriega and Panama, imp*?
menting the ^formation collection process, collecting and reporting raw data
and analyzing and disseminating data on Panama and General Noriek-
J]™ documents to include specific directives, instructions, or taskings to
collect data on General Noriega or alleged illegal- activities involving General
Noriega, cables and reports from field offices regarding General NorieS b-
volvement m or toleration of illegal activities, analyses or summaries of field
reporting on General Noriega, and geographic/subject-area studies discussing
f^ r0 S. 0r sus P e c ted rol e of General. Noriega in illegal activities- and
4) Examine the use of .iirformation about General Noriega in the foreign
policy process by identifying the agencies, organizations, and individuals who
play a role nvdeciding national security and foreign policy issues with regard to
SSS^ d + m * ervie * tf h - ^ «™w documents to determine whether infor-
mation, about General Nonega reached them and how that information was
used in making decisions. , Wcto

mivTn^ 3 ? ^"w 6 ro ?£? ed m - Levin ;^ NSC °* the status of its response to
"pron^tiy » ^-they were preparing a response and it would be provided

July 1, ;i988.-We called Mr. Levm again at' NSC. He said they hoped to have a
response soon. We mqmred about who in the. White House or the NSC
the decisions and what the. specific problems or objections are, and Mr Levin d<£
clined to provide any information.

July 5, 1988.-We again, called Mr. Levin at NSC. He advised us that a letter was
in for signature," but he declined to predict when it would be signed He alX
EE? T?J fc*** P fi Xt1 ^ H res $ onse . WOuiti take or wh0 wafi with for signa-
when i?is Sgned ° n * ^ re sponse and that he would call us

July 7, 1988.— We called Mr Bob Harris, State Department, in another attempt to

nS? ug'SSSS M d *Sf + State ^ not meet ^ ™ mta ^ hearTfrom

T 6d ^ we P^ed.to send a second letter to them specif-

ically asking for an initial meeting and access to documents

July 8, 1988.-We called Mr. Paul Prise, DEA, asking to meet. He told us that
NSC gave instructions not to meet with us until NSC gives the "go ahead " We *H
vised a second letter was coming. 6 we aa ,

July .12, 1988.— We sent a second letter, more^ detailed in what we requested in
the way of cooperation to the Departments of S£te and Justice (DEA, CrLinal Di-
vision and the U.S. Attorneys Office), and the NSC. ^ criminal Di-

TwSrtS 19 ? 8 ;- We , attempted to .continue our worfcf at the Department of Defense
Up to this point we had conducted a series of interviews with personnel involvedin

miSKP'PiSft^ ^ ^ Sis ™ Latin ^erica. We had identified and
quested about 100 documents, files, reports, cables, etc., that we felt were relevant
to our review. We had some additional meetings scheduled with agency personnel
Xrf W w I lf 7 lS i J^S; NachoMorales, Army Intelligence and Security ffiSESS
Sft NSC drrected DOD to postpone any meetings with us on the assignment^
Craig Campbell a GAO liaison official with the DOD/IG, confirmed that DOD was
told to mtnhold contacts with us. Mr. Martin Sheina, DIA, told us he couMnot
vide documents we had requested until NSC provides guidance. P

102

July 13, 1988.— We sent a letter to the department of Defense, similar to those
sent to State and Justice on July 12, 1988; asking fora resumption of cooperation —
i.e., to provide the requested doeumehts and to continue meeting with us.

July 13, 1988.— Mr; Don Schramak, Justice liaison, said- that the Justice General
Counsel staff had been working 'with NSC to develop a response, and Indicated that
it would be sent within a day or so. '

July 18, 1988.— We received a letter from Mr. Nicholas Rostow, NSC; dated July
13, 1988 which expressed his disappointment that we had not narrowed the scope of
the information we wanted and stated that "the administration is still considering
our request.

August 1, 1988.-^We- telephoned Mr. Levin at NSC-asking for the status of the
response. -He said it was being reviewed at the department of Justice and there was
n0- definite date it would be issued. Hchoped it would be issued by- the week of
August 8, 1988.

August 2, 1988.— We advised Mr: Levin, NSC, that Senator Kerry's staff had in-
formed us that Senator Kerry is prepared to hold a press conference about the lack
of cooperation with GAO. I advised Mr. Levin that the Senator's staff had stated
that if we .did not have guidelines by 9 o'clock ajn.; August 8, .1988,- or at least a
definite delivery date, Senator Kerry would hold a press conference.

August 3, 1988.— The Acting Assistant Secretary of Defense for International Se-
curity Affairs responded to our July -13, 1988, letter requesting documents by stating
that the Department of Defense could not release the information until the NSC
had completed its legal analysis. He attached'a.copy-of the NSC guidance that had
been sent to the Departments of State, the Treasury, Defense, and Justice; and the
Central Intelligence Agency on July 22, 1988. i

August 8, 1988.— We telephoned Mr, Levin, NSC, to determine the status of their
response. Mr. Levin said that, although -he could not provide a definite. date, he ex-
pects the Justice legal opinions to be provided this week. He said he would let us
know if he learns that it will take substantially longer.

■ u; . U.S. General Accounting Office,

General- 0OVEENMENT Division,
• >' „ Washington, D& May 11, 1988.

Mr. Peter F. Gruden,"

Assistant Administrator,- Planning and Inspection Division, Drug Enforcement Ad-
ministration, Department of Justice, Washington, DC.

Dear Me. Gruden. The -General Accounting Office, has been requested to under-
take a study of Panamanian leader' Gen: Manuel' Noriega's alleged 1 drug activities.
The study, under code 472165, will examine (1) the broad parameters of US^Pana-
manian relations over the past 20 years, (2) the "type of information about Noriega
developed by^ various intelligence and law enforcement agencies," (3) the extent -to
which this information reached foreign policy decision-makers, and (A) the role that
such information played in decisions on U.S. foreign policy.' '

This work will be performed by Mr. Donald L. Patton, Group Director, Mr. James
O. Benone* Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance Group, National Security and International Affairs Division. '

The work will be conducted in Washington at the Drug Enforcement Administra-
tion, the Department of State, the Department of Defense, the Department of the
Treasury, and other federal agencies. We will- advise you of any need to visit facili-
ties outside the Washington area.

We appreciate your assistance in notifying the appropriate officials of the assign-
ment. If you have any questions, please contact Mr: Patton at -275-1898 or Mr.
Benone at 275-7487. ' - '

Sincerely yours,

Arnold P. Jones,
Senior Associate Director.

[Enclosure IQ

U.S. General Accounting Office,
National Security and International Affairs Division,

Washington, DC, May 12, 1983.

Hon. Frank C. Carlucci,

Secretary of Defense, DOD Office of thelnspector General, Deputy -Assistant Inspector
General, for GAO Report Analysis, Washington, DC.
Dear Mr: Secretary: The General Accounting 'Office, has been requested to un-
dertake a study of Panamanian ' leader Gen. Manuel Noriega's alleged drug activi-

103

ties. The study under code 472165, will examine (1) the broad parameters of TI S
Panamanian relations over the 'past 20 years (2) the tvn^ nf 5^™f?T ^ I » T

S^ el r d - b ? vari r Sis SSfS tMs

Sw -^ 011 ?? d ¥ d forei ^ P^cy decisionmaker and ! (4) the role
that such information played in decisions on U.S. foreign policy

O b f P^ rf0 ^ ed bv Donald L. Patton, Group Director- Mr James

Zis^TGro^^™^*'' aBd J ° n ChaSSOn; 0f our Foreign Ec^nSc'As!

DarSeTiV^^-fr^l^ Washington at the Department of Defense, the De-
partment of State, the Department of Justice, and other federal agencies w7 will
We ^ ^P^^nt facilities outside the wSgton are!

m It T™ a t£ UI aansta »« m ™tifymg the appropriate officials.oTlhe ^ssS
Bemne at y 2^7. 7 qU6stl0nS ' please contart Mr - Patton at 275-1898 ST.
Sincerely yours,

Nancy R. Kingsbury,

Associate Director.

, T _ _ : U.S. General Accounting Office.

National Security and International Affairs Division
Mr. Paul Schott Stevens, Washington, DC, May IS, 1988.

EX ™oTDC Cretary ' NaUona \ SeCurity Oounea > 0ld Executive Office Bldg., Washing-

Dear Mr. Stevens: The General Accounting Office, has been requested to und^r
take a study of Panamanian leader Gen. Manuel NorieS's^eSri k
The study under code 472165, will ^rn^rleS^^^rt7vf^
HpxS oS^k 1 over the past 20 years, -(2) the type of informatiorabout NoriSra
developed by various intelligence and law-enforcement agencies S) S i 5
which flus information reached foreign policy decisionmS ?£d (4) the rote 42
such information played in decisions on U.S. foreign policy

O 7^T rk T^ b f P^™* 1 fa y Mr. Donald L. Patton, Group Director; Mr James
SsSrG^ t0r " m " Charge: Mr ' >Jon of our ***** Eco^ml™

Qt? 6 r^T^i 6 co ? du , ct ed at the National Security Council, the Department of
SencieJ 6 P Dt ° f Defense - Department of JustS, and oTh^?ederaf

We appreciate any assistance you can provide to our staff. If you have anv Ques-
tions, please contact Mr. Patton at 275-1898 or Mr. Benone at 275-7487
famcerely yours,

Joseph E. Kelly,
Associate Director.

U.S. General Accounting Office,

RATIONAL OECURITY AND INTERNATIONAL AFFAIRS DIVISION

Hon. George P. Shultz, . Washington, DC, May IS, 1988.

Secretary of State, GAO Liaison, Office of the Comptroller, Washington, DC

H.ST m U S / CB f ^.General Accounting Office, has been requested to un-
dertake a study of Panamanian leader Gen. Manuel ^rieea's aUe^ ZJS
bes The study under code 472165, will examine 3) ffi "broad pSSfS

SST^^ 0115 - 0 ^-^,^ 1 20 yearS ' (2) ae of information about Nor-
iega developed by various intelhgence and law-enforcement agencies (3) the extent

ftiSh ™******Sn Policy decisionmakers, Ind ! (4) ti^Vot

that such information played in decisions on U.S. foreign policy

This work will be performed by Mr. Donald L. Patton, Group Director- Mr James
sisSe Gro^p Uat ° r " m " Charge; ^ ^ m of our Fo^ignTco^mlclS

rJtHH W f \ ^ be c ?^ d ^ teA Washington at the Department of State the De-
partment of Defense, the Department of Justice, and other federal agencS We wul
advise you of any-need to visit State Department facilities outeidelfce vSshh!gZ

104

We appreciate your assistance in notifying the appropriate officials of the assign-
ment. If yoii have any questions, please contact Mr. Patton at 275-1898 or Mr.
Benone at 275-7487.

Sincerely yours, ,

Joseph E. Kelley,
Associate Director.

U.S. General Accounting Office,
. General Government Division, .
- . Washington, DC, May 16, 1988

Mr. John C. Keenby,

Assistant Attorney General, Criminal Division, Department of Justice, Washington,
DC

Dear Mr. Keeney. The General Accounting Office, lias been ^requested to under-
take a study of Panamanian leader Gen. Manuel Noriega's alleged drug, activities.
The study, under code 472165, will examine (1) the broad parameters of U.S.-Pana-
manian relations over the past 20 years, (2) the type of information about Noriega
developed by various intelligence and. law-enforcement agencies, (3) the extent to
which this information reached foreign policy decisionmakers, and (4) the role that
such information played in decisions on U.S. foreign policy.

This work will be performed by Mr. Donald L. Patton, Group Director; Mr. James
O. Benone, Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance' Group, National Security and International Affairs Division.

We would like to meet with knowledgeable Crmiinal Division officials. We also
plan to conduct work at other Department of Justice offices, the Department of De-
fense, the Department of State, and other federal agencies.

We appreciate your assistance in notifying the appropriate, officials of the assign-
ment. If you have any questions, please contact Mr. -Patton at 275-1898 or Mr.
Benone at 275-7687.

Sincerely yours, - _ •

Arnold P. Jones,
Senior Associate Director.

U.S. General Accounting Office,

General Government Division,

. Washington, DC, May 16 r 1988.

Mr. Manuel Rodriquez,

Legal Counsel, Executive Office for U.S. Attorneys, Deparment of Justice, Washing-
ton, DC.

Dear Mr. Rodriquez. The General Accounting Office, has been requested to un-
dertake a study of Panamanian leader Gen. Manuel Noriega's alleged drug activi-
ties. The study, under code 472165, will examine (1) the broad parameters of U.S.-
Panamanian relations over the past 20 years, (2) the type of information about Nor-
iega developed by various intelligence and law-enforcement agencies, (3) the extent
to which "this information reached foreign policy decisionmakers, and (4) the role
that such information played in decisions on U.S. foreign policy. -

This work will be performed by Mr. Donald L. Patton, Group Director; Mr. James
O. Benone, Evaluator-in-Charge; and Mr. Jon Chasson; of our Foreign Economic As-
sistance Gr'oupi National Security and International Affairs Division:.

We would like to meet with the U.S. Attorney in both Miami and Tampa, Florida,
who have brought indictments against Gen. Noriega to discuss the genesis of the
indictments, identify other people that we should, talk with, and obtain information
about the cases. We also plan to conduct work at other Department of Justice of-
fices, the Department of Defense, the" Department of State, and other federal agen-
cies.

We appreciate your assistance in notifying the appropriate officials of the assign-
ment. If you have any questions, please contact Mr. Patton at 275-1898 or Mr.
Benone at 275-7687.
Sincerely yours,

Arnold P; Jones,
Senior Associate Director.

105

U.S. General Accounting Office,
National Security and International Affairs Division,

Washington, DC, May 24, 1988.

Hon. William H, Webster,

Director, Central Intelligence Agency, Director, Office of Legislative Liaison, Wash-
ington, DC.

Dear Mr. Webster. The General Accounting Office, has been requested to under-
take a study of Panamanian leader Gen. Manuel Noriega's alleged drug activities
The study, under code 472165,.wiU examine (1) selected aspects of U.S. Panamanian"
relations over the past.20 years, (2) the type of information about Noriega developed
by various intelligence and law-enforcement agencies,' (3) the extent to which this
information reached foreign policy decisionmakers, and (4) the role that such infor-
mation played in decisions on U.S. foreign policy.

This work will be. performed under the direction of Nancy R. Kingsbury Associate
Director by Mr. Donald L. Patton, Group Director; Mr. James O. Benone, Evaluator-
ln-Charge; and Mr. Jon Chasson; of our Foreign Economic Assistance Group

The work be conducted in Washington at the Department of State, the Depart-
ment of Defense, the Department of Justice, and other federal agencies.

We would like to meet with the Agency representatives to discuss these issues
and obtain the Agency's perspective on them. We appreciate any assistance you can
provide to our staff in this regard. If you have any questions, please contact Mr
Patton or Mr. Benone fit 275-5790. -
Sincerely yours,

Frank C. Conahan,
■ Assistant Comptroller General

U.S. General Accounting Office,
National Security and International Affairs Division,

Washington, DC, June 23, 1988.

Mr. C. Nicholas Rostow,

Special Assistant to the President and Legal Advisor, National Security Council
Washington,. DC. *

Dear Mr. Rostow. As you are aware, Senator John Kerry, Chairman of the Sub-
committee on Terrorism, Narcotics, and' International Operations and Representa-
tive Bill Alexander, are concerned that information about illegal activities by high-
level officials: of other nations may not be adequately considered in U S foreign
policy decisions. At their requesfi,:the General Accounting Office is undertaking an
initial case study of how information about General Noriega was developed by vari-
ous government agencies, and what role such information played in policy decisions
regarding Panama.

To satisfy this request, we will: 1

(1) Obtain an agency overview.— At each agency that develops relevant informa-
tion on General Noriega or his possible involvement in illegal activities, we will re-
ceive a briefing that outlines the general organizational structure and the oper-
ational procedures related to the agency's data collection, analysis, and dissemina-
tion systems.

(2) Interview relevant personnel.— Once we understand the basic organizational
structure, we will then interview key personnel responsible for (1) defining agency
information needs with regard to Noriega and Panama, (2) implementing themfor-
mation collection, process, (3) collecting and reporting raw data, and (4) analyzing
and disseminating data on Panama and Noriega.

(3) Review documents.— As we learn more about each-agency's collection and re-
porting processes, we will request relevant documents. We anticipate that these will
mclude: specific directives, instructions, or taskings to collect data on Noriega or al-
leged illegal activities involving Noriega, cables and reports from field offices re-
garding Noriega a involvement in or toleration of illegal activities, analyses or sum-
maries ot field reporting on Noriega, and geographic/subject-area studies discussine
the role or suspected role of Noriega in illegal activities.

(4) Examine the use of information ' about Noriega in the foreign policy process —
After completing a systematic review at each agency, we will attempt to determine
how agency reporting on Noriega may. have influenced foreign policy decisions on
Panama. We will first identify the agencies, organizations, and individuals who play
arole in deciding national security and foreign' policy issues with regard to Panama
Through interviews and a review of relevant documents, we will determine whether

106

information about Noriega reached them, and how that information was used in
making decisions. .,

As part of our review, we will contact appropriate officials of the National Securi-
ty Council who are now or were in the past involved in policy .decisions regarding
Panama. We intend to discuss their knowledge and utilization of information con-
cerning General Noriega's illegal activities.

We understand that this review will involve potentially sensitive material that
may require special controls and safeguards. We are willing to discuss'this issue
with you,andtake appropriate precautions.

Mr. Levin indicated that, you would handle this request expeditiously, and I look
forward to hearing from you early next>we.ek. If "you have any additional questions
about our review, please contact Mr. -Patton at 275-1898 or Mr. Benone at 275-7487.
Sincerely yours, ■ .■"■'„-

- NaNCYK.- _KlNGSBURY.

Associate Director.

U.S. General Accounting Office,
National Security and International Affai^ Division,

■ , Washington, DC, July 12, 1988.

Mr. Lawrence S. McWhorter, .

Director, Executive Office for U.S. Attorneys, Department of Justice, Washington, DC.

Dear Mr, McWhorteb. As we informed your staff in our letter of May 16, 1988,
the General Accounting Office is undertaking a case study of how information about
General.Noriega was developed by various government agencies, arid what role such
information played in policy decisions regarding Panama. As agreed with your staff,
we initially postponed audit work at the Justice Department until we 'had met . with
National Security Council officials to more fully explain our review objectives and
give them an opportunity to coordinate agency participation in our_review. Howev-
er, because the National Security Council has not acted, and because of the high
level of congressional interest in this assignment, we must now^ implement our
review independently at each agency.

We are therefore requesting that you provide us with the following: ■

1. Documents outlining the organizational components involved in, and the
operational, procedures related to, the U.S. Attorney requests for and analysis of
foreign intelligence -.data.

2. Documents relating to the investigations of .alleged drug trafficking by Gen-
eral Noriega conducted by the U.S. Attorneys; in Miami and Tampa.

3. Any memos, reports, analyses, studies, briefing papers, meeting records, or
other documents generated by the offices of the U.S. Attorneys which discuss
allegations of illegal activities by General Noriega, and interagency communica-
tions on these matters.

We anticipate that as our review progresses, we will make additional requests for
documentation.

To facilitate our review, we request that, appropriate officials meet with us at an
opening conference no later than July 2(J. At that time, we will establish a schedule
for obtaining the needed documents.

With the input and cooperation of U.S. Attorney officials, I am confident that we
can successfully complete our review in a timely manner.

If you have any additional questions about our review, please contact Mr. Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours, ' v '.

' Nancy R. Kingsbury.

Associate Director.

U.S. General Accounting Office,
■ National Security and International' Affairs Division,

-Washington, DC, July 12,. 1988.

Mr. Edward S. Dennis,

Assistant Attorney General, Criminal Division; Department of Justice, Washington,
DC.

Dear Mr. Dennis. As we.iDformed your staff in our letter of May 16, 1988, the
General Accounting Office is undertaking a case study of how iiifbrniation about
General Noriega~was developed by various, government agencies,' and'wnat "role such

107

information played in policy decisions regarding Panama. We initiallv nnRtr,™^
audit work at the Justice Department and several othergovern^n^^cieS
we had met with National Security Council officials to more fuUvTxD^SL^Sr
review objectives and had given them an opportunity to coorSte^encVTSciDa

£5 £n2£™?ST' £TT er 'i b S cauBe &e National &curit^Scfn^ nrfSSSd
and because of the high level of congressional interest in this assignment we nnS
now implement our review independently at each agency ^ ' We mUBt

We are therefgr^ requesting that youprovide us with the following

4- Documents outlining the organizational components involved in and the

S± 0nal ^ Cedur ^ reIa ^ to > *"» ^ Division's developnSnt^f law
enforcement information and its request for and analysis of foreign intellSence
data provided by the various -collection agencies «*™so intelligence

2. Any memos, reports, analyses, studies, briefing papers, meeting records or
other documents generated by. the Division ^^^dt^an^tofofSS^S

doc^mSSr 33 0Uf revieW progr ^ ses > we will make additional requests for
To facilitate 6ur review, we request that appropriate officials meet with us at *n

^^ffii^-g^^^gg!^ ****

Sincerely yours, ' - ■" . - "

Nancy R. Kingsbury,
- * ' Associate Director.

, T c General Accounting Office

.NATIONAL bECURlTY AND INTERNATIONAL - AFFADIS DIVISION

^ Washington, DC, July 12, 1988.

Mr. John C. Lawn, v 7 '

Drug Enforcement Administration, Washington, DC

Dear Mr. Lawn. As we informed your staff in our letter of Mav 11 1988 rhP
General Accounting Office ^undertaking a case study, under ^ode4T§6 of how
information about General Noriega was developed by various government aWncieT
and what role such ^formation played in poUc/dedsions regaXgXianl? ITS
request of your staff, we initially postponed audit work at^e^ug^aXcement
^cKSrSS ^ We ^ our ^view objectives to thf3SStoS!

ZS?^ ? ■ bad 311 0 PP or tunity to : coordinate the executive agencv

participation m our review. However, because the National Security tadl Ent
acted, and because of the high level of congressional mtarertlntK aSg^nt we
must now implement our review independently at each agency ^ ^

We are therefore requesting that DEA provide us with:

rJ^ri^fif ? Ut rS£ g f 6 o'ga^ttonal structure and the operational pro-
cedures related to DEA's development of law enforcement information and £
foreign mtelligence data coUection, analysis, and dissemination sySeni

2, Documents which establish DEA's procedures for (a) defining foreign intel-
t/Tw-^ with regard toJSeneral Noriega SSnSfaSiS.
aS^^ 8 ^ 1 f 0 ? natl0 ° collection process; (c) collecting and reporting ^
data; and (d) analyzing and dissernniating date on Panama and General Nor-
lega. ^

3. Specific directives, instructions, or taskmgs to collect data on General Nor-
iega or his alleged illegal, activities, cables and reports from field offiSs^eard

of field reporting on him, and geographic/subject-area studies discussmelK
role or suspected role m illegal activities e ^

Q . To ^ ( ^ fcate ou f review, we are requesting an opening conference with appropri-
ate officials no later than July 20. At that time, we will more fully dJcuss 6?e SI

dfcunST^ ^ ^ WOfk ^ eatobB * 3 SChedule S SSenS

&e ^T? and "op 6 ™* 011 of D EA officials, I am confident that we can suc-
cessfully complete our review in a timely manner.

108

If you have any additional questions about our review, please contact Mr. Donald
L Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours, -

. . Associate Director.

U.S: General Accounting Office,
National Security and International Affairs Division,

Washington, DC, July 12, 1988.

Euxittte Sefrel^ry^Na^okal Security Council, Old Executive Office Building, Wash-
ington, DC '

Dear Mr. Stevens' As we informed you in our letter of May 13, 1988, and Mr.
Rdstbw in our letter of June 23, the General Accounting Office is undertaking a
case study of how information about General Noriega was developed by .various gov-
ernment agencies, and what role such information played in policy decisions regard-
ing Panama At the request of the National Security Council staff* we mitially post-
poned audit work at the Council and. several other government agencies until we
had met with them to more fully explain our review objectives .and had given them
an opportunity to coordinate agency participation in bur review. However, because
we have not received a response to our letter of June 23, and because of the high
level of congressional interest in this assignment, we must now ^implement our
review independently at each agency. . . . _^ . '

We have sent requests to eachagency, asking that appropriate officials meet with
us to establish a timetable for collecting and reviewing relevant documents. We ask
that the National Security Council provide us with:

1 Documents outlining the organizational structure and the operational pro-
cedures related to the National. Security Council's requests for and analysis of
foreign intelligence data provided by the various collection agencies.

2 Any memos, reports, analyses, studies, briefing papers,- meeting records, or
otherdbcuments generated by the National Security Council skiff which discuss
allegations of illegal activities by General Noriega and the possible impact ot
such activities on U.S. relations with Panama.

We anticipate that as our review progresses, we will make additional requests lor

d °S^a3Ste.t?our review, we- request that appropriate officials meet with us at an
-opening: inference no later than July 20. At that time; will establish a schedule
for obtaining the" needed documents: . - .

Withlhe mputand cooperation of National Security Council officials, I am confi-
dent that we can,successfully : completeour review in a timely manner

If you have any additional questions about our review, please contact Mr. Donald
L Pattonat "275-1898 or Mr. JamesO. Benone at 275-7487.

Sincerely yours, Nancy R. Kjngsbury,

Associate Director.

U.S. General Accounting Office,
National Security and International Affairs Division,

Washington, DC, July 12, Iffea.

Hon. George P. Shultz, - „ „ .. „ T .

Secretary of State, GAO Liaison, Officeofthe Comptroller, Washington, DC.

Dear Mr. Secretary. As we informed you in our letter of May 13, 1988^ the Gen- -
eral Accounting Office is undertaking a case study, under code 472165, of how infor-
mation about General Noriega was developed by various government agencies, and
what role such information played in policy decisions regardmg Panama. At the re-
quest of your staff, we initially postponed audit wor^ at the State Department until
we liad explained our review objectives to the National Secunty Oiuncil and had
riven them an opportunity 'to coordinate the executive agency participation m our
review However? because the National Security Council has not acted, and because
of the high level of congressional interest in this assignment, we must now imple-
ment our review independently at each agency.

Weare therefore requesting that the State Department provide us wtfh: \

109

1. Documents outlining the organizational structure and the operational pro-
cedures related to the State Department's foreign intelligence data collection,
analysis, -and dissemination systems.

2. Documents which establish the State Department's procedures for (a) defin-
ing foreign intelligence information needs with regard to General Noriega and
Panama, (b) implementing the information collection process, (c) collecting and
reporting raw data, and (d) analyzing and disseminating data on Panama and
General Noriega.

3. Specific directives, instructions, or taskings to collect data on General Nor-
iega or his alleged illegal activities, cables and reports from embassies regard-
ing his involvement in or toleration of illegal activities, analyses or summaries

..of field reporting on. him, and geographic/subject-area studies discussing his

role or suspected role in illegal activities.
We anticipate that many of these documents are available within the Offices of
the Assistant Secretary of State for Inter-American Affairs, the Assistant Secretary
for Intelligence and Research, and the Assistant Secretary for Narcotics Matters.

To facilitate our review, we are requesting an opening conference with appropri-
ate officals ho later than July 20. At that time, we will more fully discuss the specif-
ic parameters of our audit work and establish a schedule for obtaining the needed
documents.

With the input and cooperation of State Department' officials, I am confident that
we can successfully complete our review in a time manner.

If you have any additional questions about our review, please contact Mr Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours,

' Nancy R. Kingsbury,

" . Associate Director.

U.S. General Accounting Office,
National Security and International Affairs Division,

Washington, DC, July 13, 1988.

Hon. Frank C. Carlucci,

Secretary of Defense, DOD Office of the Inspector General, Deputy Assistant Inspector
General for GAO Reports Analysis, Washington, DC.

Dear Mr. Secretary. As we informed you in our letter of May 12, 1988, the Gen-
eral Accounting Office is undertaking a case study, under, code 472165, of how infor-
mation about General Noriega was developed by various government agencies, and
what role such information played in policy decisions regarding Panama. With the
cooperation of Department of Defense officials, mcluding those from the military
services and other Defense' agencies, we have already made substantial progress
toward achieving our review objectives. However, we were advised on July 12, 1988,
that these officials have been directed to postpone meeting with us and providing us
with documents until the National Security Council provides guidance on the extent
that the Department should participate in our review.

Since initiating this review, we have fully briefed the National Security Council
staff oh our review objectives and methodology and allowed them time to provide
guidance to execute branch agencies. However, because the Council has not issued
such guidance and because of the high level of congressional interest in this assign-
ment, we have advised the Council that we must now implement our review inde-
pendently at each agency. '

We are therefore requesting that the Department resume cooperating with us on ■=
this' assignment and provide us with documents we need to accomplish our review
objectives. In addition to the documents that we already have requested, we need to
obtain: .-

1. Cables and intelligence reports generated by, or in the possession of, the
Department of Defense and its various components which discuss General Nor-
iega and his alleged illegal activities!.

2. Any other memos, reports, analyses, studies, briefing papers, meeting
records, other documents, or recorded information generated by, or in the pos-
session of, thel)epartineht'6r its components which discuss allegations of illegal
activities by General Noriega and the possible impact of such activities on U.S.
relations with'Panama. ' ~

To facilitate our review, we would appreciate being advised in writing no later\
than July" 20, 1988, of your intended action on t^ip matter. ^

. 110

With the Department's renewed cooperation, I am confident that we can success-
fully complete our review in a timely maimer.

If you have any additional questions about our review, please contact Mr. Donald
L. Patton at 275-1898 or Mr. James O. Benone at 275-7487.
Sincerely yours,

Nancy R. Kingsbury;

Associate Director.

[Enclosure HI] - . s

National Sepuhtty Council,
Washington, DC, July 13, 1988.

Ms. Nancy E. Kingsbury,

Associate Director, National -Security and International Affairs DivUion U.S. Gener-
al Accounting Office,' Washington, DC. -' '"-
Dear Ms. Kingshury. I am "writing in response to' your request concerning a
study of the alleged drug activities of Manuel Noriega, -and the role information
about such activities played in decisions about U.S. foreign policy (Study #472165).

As described in Mr. Kelly's May 13, 1988, letter to Paul Stevens and your June 23,
1988, letter to me, your request seeks access to sensitive law enforcement and, intel-
ligence files covering a substantial period ^of tihie^ In nur meeting, your staff con-
firmed that your three areas of interest were intelligence files, law enforcement
files ; and the deliberative process of the Executive branch, including, internal com-
munications and deliberations leading to Executive' branch actions taken .pursuant
to the President's constitutional authority. I was disappointed "that your letter did
not contain, any narrowing of the request. The request raises important statutory
and constitutional issues. The Administration is analyzing them now, and when its
deliberation is complete, I shall reply further to your letter of June 23^ 1988.
Sincerely, N

Nicholas Rostow,
Special Assistant to the President and Legal Adviser.

National Security Council,
Washington, DC, July 25, 1988.

Ms. Nancy R. Kingsbury,

Associate Director, National Security and International Affairs Division, U.S. Gener-
al Accounting Office, Washington, DC

Dear Ms. Kingsbury. I am responding to your' July 12,^1988, letter, concerning
your study involving Manuel Noriega- As Nicholas Rostow has informed you, the
legal issues raised by your request are imder consideration. We will respond to your
request promptly' after the completion of the ■necessary legal analysis. In the mean-
time, we must decline your request for an "opening conference" oh or before July
20, 1988. '
Sincerely, ■

Paul 'Schott Stevens, .

Executive Secretary.

[Enclosure IV]

Central Intelligence Agency,
, - Washington, DC, June 13, 1988.

Mr. Frank C. Conahan,

Assistant Comptroller General, National Security and International Affairs Division,
Generdl Accounting Office, Washington, DC 1 ■

Dear Mr. Conahan. The Director has asked me to respond to your letter of 24
May 1988 that described the General Accounting Office's investigation of allegations
made against General Noriega of Panama. _

All Agency activities in Central America, as well as information we receive con-
cerning other U.S. Government activities in the region, are subject to close and con-
tinuing scrutiny by the House and Senate Intelligence Committees. Furthermore,
any assessment of poKcy-related questions^ should be directed .to the appropriate
components' of the Executive Branch, such as the Departments of State and Defense.

Ill

, 1 ^Smcerelyf ^ Cami0t h ° m0re ™ case.

, John L. Helgerson^
Director of Congressional Affairs.

[Enclosure V]

The Assistant Secretary of Defense
Ms. Nancy R, Kingsbury Washington, DC, August 3, 1988.

US. Gene,

iS^ST^^S^.^iff lette V° 1- Secretary of De-

W^SX^ *«* Coun-

reWW sSc?refy e NSC ^ ^^^SSt^S^^"" 1 mi ™* TO . d m y0Ur

} •« a , ^wrence Robka, Jr.,

Actm S Assistant Secretary of Defense

Attachment.
^ [Memorandum]

Paul Schott Sevens

Executive Secretary.

Attachment: Tab A-Letter from Nicholas. Rostow tenancy Kingsbury.

National Security Council
Ms. Nancy R. Kingsbury ' Washington, DQ July 13i ' 19 88.

US Gene,

^f & concerning a

about such activities placed ^ SSqTSS ttq^-^ ^ role "formation
As described in Mr. Kefiv's Mav if 1 98R^ ■ l I' S b fiM 7*SF I pohcv (Stud y 472165).
1988, letter to me, your request seeks' acIL^ to Paul Stevens and your June 23,
Ugence files covering a ^XtiS^od^f H^f laW en { orcenient ^ intel-
firmed that your three area^f inr^ c+ ^ I our meet ™g, your staff con-
files, and ^^bSS^a^'S^^SlS^^^^- enforc ^ent
mutations and deliberations f^g^S^eb'SS ^ udm f ***** corn-
to the President's constitutional «y^^

112

not contain any narrowing of the request. The request raises important statutory
and constitutional issues. The Administration is analyzing them now, and when its
deliberation is complete^ I shall reply further to your, letter of June 23, 1988.
Sincerely,

Nicholas Rostow,
Special Assistant to the President
and Legal Adviser.

MONEY
Introduction • '

The phenomenal profit associated with the. narcotics trade is the
foundation upon which the cartel's power is based. Therefore, a;
concerted attack on the .cartels' 'money-laundering operations may
be one of the most effective jneans to damage the international
narcotics trade.

The Subcommittee heard testimony from a number of witnesses
concerning the magnitude of money-laundering. Those i testifying
ranged from narcotics traffickers who laundered drug profits, to
one of the Medellin Carters money launderers, to an authority on
international banking.

In reviewing this, testimony,^ members of ( the Subcommittee sub-
sequently drafted .money^aunderihg .legislation which wa> incorpo-
rated into the Omnibus Drug Bill of 1988 and enacted into law in
October, 1988. „ x '

Defining the Problem of Money Laundering

The phrase "money laundering" has been used to describe a wide
range of illegal financial operations.. The .most basic form of money
laundering is the skimming of funds from cash-generating business-
es to evade taxes. The Internal Revenue Service estimates that in
1988 some $50 billion was hidden in this way.

The term is also used to describe schemes to hide the cash pro-
duced by a range of illegal activities, including illegal gambling,
prostitution, and drug trafficking. Estimating the size of this un-
derground economy is extremely difficult for obvious reasons. How-
ever, law enforcement officials have consistently estimated that
these activities may generate as much as $100 billion in illicit cash
profits each year in the United States.

For the relatively small-time drug trafficker, the laundering of
money is simple — they spend their profits. They, pay the wages of
accomplices and suppliers in cash; and, they use cash to purchase
luxury items such as cars, jewelry and vacation homes.

- However, as one moves higher up the drug distribution hierar-
chy, the profits are so large that they cannot be completely hidden
through consumption, and capital is retained. Holding capital in
the form of currency is very costly. Not only are secure storage and
transportation of currency prohibitively expensive, but also the op-
portunity costs in terms of lost earning power are substantial.
These problems can be' overcome only by depositing the mohey.in a
financial institution which takes custody of the currency, pays in-
terest on the balances, and can transfer funds anywhere in the
world through the use of electronic funds transfer system.

113

The Bank Secrecy Act Restricts Money Laundering

TW^lT 1 " 1 !^ ^ t™** mushr <>omed during the 1970's, the
United States become the center of money-laundering activities In
ST^rA^ P^V 1 ? Bank Secrecy law wis enacted £
«?nnnn ^ re ^ es , that ^ c *sh .transactions in excess of
$10 000 must be reported monthly to the Internal Revenue Service
including bank and securities brokerage transactions, traiisactions
in cash at casionos, real estate closings, and even automobile, boat
and an-craft purchases. Large shipments of cash into or out of the
country must be reported as well.

^P 16 , r t? orting requirement was viewed as an essential step to
prevent the proceeds of crime from being laundered. The require-
™,M +ltt & « ^, w herdjy law enforcement authorities

www f fa ? dB nested m legitimate enterprises to determine
whether or not such funds had their origins in criminal activities
However, initial enforcement of the currency reporting require
ments of the Bank Secrecy Act of 1974 proved to be lax, and siS
cant sums of money continued to be laundered through U.S finan-
cial mstitutions 1 Increased attention to the problem by the Treas-
ury Department brought stricter enforcement efforts during the
Reagan Ad^nista-ation. These efforts included a much publicized
prosecution in 1985 of the Bank of Boston, and indictments of™
financial. institutions for accepting cash deposits of over $10 000
without reporting them in the IRS. ^ '

rw 2 16 f % st /kter enforcement measures, the Treasury

Department determined that financial institutions in the United
States were. mcreasmg y complying with the reporting require-
ments -However ^Treasury also recognized that as compliance in-
creased on the United States, those, engaged in criminal actr^ttes
were moving more and more U.S. currency overseas to countries
whose banking regulations guaranteed that such transactions
would remain secret.

The International Loophole

Testimony delivered before the Subcommittee described in detail
the movement of U.S currency to be laundered in offshore banks

a «iri- meth ?f ? s ±* b ? both drug dealers and bankers to avoid
regulation and detection. 2

The profits from the international drug trade are moved to anv
country which guarantees the fewest problems^ the trafficker in
handling the proceeds from the illicit activities. As a result drue
money is moved to countries, such as Panama, which do-not collect
taxes on foreign accounts and which provide the fewest refections
on the movement of U.S. currency across their borders 3
«™Ti e b ^ess has been highly competitive, attracting many
smaller nations which historically have served as "tax havens" ui
order to attract capital from- around the world. Among the princi-
pal money-laundermg/tax havens -have been the Bahamas the

1 See testimony of Martin Mayer, Part 3, April 5, 1988, p 64
t ^xnnxgtea testimony of Martin Mayer, April 5, 1988, p 64
■» tttuL, p. bo.

114

Cayman Islands, Hong Kong, Liechtenstein, Luxembourg Monaco,
Nauru, Singapore, and the Turks and Caicos Islands. 4
7 By the mid-1980's, Panama became an important center for the
drug trade because it offered everything a trafficker needed.
Panama is strategically located on the major route between- the
United States and South America. It has very stringent bank secre-
cy laws, and in the figure of General . Noriega, guaranteed physical
protection of money couriers moving currency to Panama.

The use of these jurisdictions to launder drug money is described
in the case histories below, selected from the Subcommittee hear-
ings. Evident in the case histories is the ease with whjch .drug traf-
fickers move money out of the United States to foreign jurisdic-
tions for deposit where, in turn, the funds can then be electronical-
ly transferred back into the United States.

Case Histories
cayman islands

Leigh Ritch, convicted of narcotics trafficking in 1986,. ran one of
the largest marijuana smuggling organizations ever uncovered in
the United States. By the time he was thirty years old Ritch was
transacting drug deals worth hundreds of millions of dollars^

Ritch told -die Subcommittee that all of his distributors paid- him
in cash and that he stored the bills in a safehbuse in the Tampa,
Florida area. 6 He employed old high school friends to count and
package the money for shipment to an offshore banking haven
where the money could be converted into a bank deposit. 7 For
Ritch, =the ideal place was the Cayman Islands, renowned for its
bank secrecy laws. 8 ^ •

Ritch held dual U.S.-British citizenship and had lived and
worked in the Cayman islands. He had learned that .the Island's
hundreds of financial institutions existed principally to assist Latin
Americans in evading exchange controls and taxes :in their own
countries. These institutions would not require any information on
deposits of large sums of U.S. currency. 9

Ritch testified that the Cayman, panks charged a one percent fee
for laundering, the money, which they characterized as a fee for
"counting the cash." After taking such a fee, the banks would then
ship the funds to the U.S. Federal Reserve System. 10

When Ritch first began selling narcotics, the amounts a£* curren-
cy he handled were in the hundreds of thousands of dollars. He
would place the currency in a suitcase and fly from -Tampa to the
Cayman Islands. As the amounts of cash he. handled grew, and his
trips became more frequent, Ritch began to fear that His activities
would be uncovered. As Ritch put it, "there was a lot of U.S. intel-
ligence on the island, watching the airport, watching . . . the bank

* Senate Committee on Government Operations, Crime and Secrecy: The Use of Offshore
Banks -and Companies, Senate Report 99-130, p. 141.

s Subcommittee testimony of Leigh Ritcb, February 8, 1988; dd. 179-180
8 Ibid., p. 155.
7 Ibid., p. 154.
a Ibid., p. 154.

fl Ibid., p. 148. : ,

io Subcommittee testimony of Lee Ritch, February 8, 1988, p. 74.

115

transactions there."- Ritch /also learned that Cayman banks were
^Sfi reSSU A ed * not to accept deposits^ ££wn ^

PaSSS Accoedm &' to move his mo?ef to

In Panama Ritch relied on Ids partner in the smuggling oper-
ation, Stephen : Kalian, to act as his "agent to deal with the pTI

& fi Tp W ¥ the ^^atiom -He shuttled between
Florida.and Panama and, according to Ritch, negotiated with GeS
er^Nonega to insure the security of the money laundering ope*

BAHAMAS

ernr^r'S^l^^-K smuggler tumedfederal gov-

SS?? n V lnf 5 nner ' descnbed the dimensions of the currency gener-

h?to^tt U ?-^ a - Cti °^ ^ recounti *e ^w there weTe fees
he would sit in his spacious living room, ankle-deep in twenty fiffcv

tributors h ^

tnbutors who paid him for the marijuana he smuggled into the
Miami area, Garcia then. paid, his suppliers and members of h£
drug ^organization. He claims also to have paid,several tegh xank-
nfJl^T <?fi S a f2 a «P to^aWNO for permission to trSns^h,
SS^C^S t ^ rou fEL tiie Bahamas.^ These payments still left S
^^^T^ o^^ars in currency at, time wnSn

the^SS* frSf?^ ^/B^^-banking system to launder
the profits from the, narcotics business, particularly since he was

thP ^i£S% ^ t ' the tEanait P 0 ^ for comingilS

the United States. The Bahamas had strict *ank secrecy law! and

SEE - for reporting the deposit of UW

rency in Bahamian financial institutions

t> 1 ?^?v f0 T d i, that ^ ia ^ y many Bahamian banks were more
than wilhng.to have his business. But like the Riteh-Kalish orSS
zation .the Garcia organization found that increasing pressurfnv
SSiJi™ J 33 mafcm ^ 1 the Bahamas a less attractive^ place to do
rSSS Jn- m ° ne /. laund ering. Accordingly, on the advice of
Ramon IVhlian Rodriguez, a money launderer for the MedelHn
cartel, and a number of Cuban American narcoticT trafficker?

o^l^ d i t0 T Bodriguea and the Rtt£*32

organization in .laundering his profits in Panama. .

PANAMA

Panama had grown into a money-laundering center long before
General Noriega came into.power, in large part as a resul?!f blmk*
ing "reforms" instituted in the late 196&. Bank secre^laws were
adopted and regulations on financial institutions repTaleT which
led to a virtual explosion in the Panamanian banking mdustrTby
the early 1970's. Dozens, of foreign banks opened branchel S

11 Ibid., p. 161.

it | e t tim011 ? ° [ ^ ffitch, Part 2, February 8, 1988, pp. 67-68
" aM Jn testun0Ii y ° f Lui s Garcia, May 27, 1987, pp. 33^34.

116

Panama, many of them geared toward attracting the proceeds of
illegal activity.

By the early 1980's, there were well over one hundred banks in
Panama and more than fifty of those were owned by Colombians.
These banks attracted significant sums of : drug money as the Car-
tel's -relationship with General Noriega grew. Panama became so
successful in attracting drug money, that according- to U.S. Treas-
ury estimates, staggering sums of currency, amounting to at . least
several billion dollars were being laundered each year.. (Panama's
development as a money laundering center prior to 1984 is de-
scribed more fully in the chapter on Panama.) "

Amjad Awan, the former manager of the Bank of Credit and
Commerce International Panama, stated in a Subcommittee deposi-
tion that many of the international- banks in Panama w illin gly
laundered money. He said that when unusually large amounts of
cash were returned from Panama to the Federal Reserve Bank in
New York in 1984, the Panamanian Bankers' Association, a self-
regulatory organization, met to discuss how to deal with -this prob-
lem. Voluntary limits on the amount of U.S. currency that any one
bank could return>to the National Bank of Panama were proposed.
A suggested $5 million dollar limit was vigorously protested by the
Swiss banks and a ^number of large North American banks. When
voluntary .limits were'' adopted, the Swiss banks avoided compliance
by chartering aircraft to fly ^currency back to Europe^f .

Awan also stated that the bankers could get money laundering
business by paying kickbacks of one or two percent to the owners
of Brinks of Panama; According to Awan, Brinks controlled the
placement of many drug- deposits and for a fee, >would direct the
shipment of -cash to the batik which paida'commission. In addition,
banks which laundered money tolerated ! eash skimming by officials
of the National Bank of Panama when the money was transferred
for repatriation. To offset these expenses and earn a substantial
profit, the banks charged special cash handling fees for taking in
large sums of currency. 16

Marijuana smuggler Leigh Ritch confirmed this account. He tes-
tified that Cesar Rodriguez, a drug trafficker who worked for Nor-
iega, had established a two to three percent fee for money laun-
dered by his organization. The fee dropped to one percent for each
deposit over $5 million. The services Cesar Rodriguez provided in-
cluded meeting the shipments of money at the airport with ar-
mored cars, bodyguards and limousines, arid providing continuous
personal security while the traffickers remained in Panama. 17

Panama became so secure for money laundering, that the princi-
pal problem for the drug traffickers was security for the money as
it left the United States, not once it reached Panama. To solve this
problem, the Cartel experimented with different methods of han-
dling funds in order to prevent seizures. 18 Often, the money was
flown to Panama as commercial air freight on either Bran iff air-

Ifi Subcommittee deposition of Awan, Part 4, pp. 473-508.
"Ibid.

17 Subcommittee testimony of Lee Riteb, February 8, 1988, p. 67.
ia Ibid., p. 50.

117

lines or Eastern Airlines. 19 Currency was shipped in pallets or in
containers^ - (

The use, of palletized shipments was confirmed by an Eastern
pilot- who testified that after . his. plane landed in Panama he
watched pallets being unloaded from his craft into -waiting armored
cars. "When he inquired as to the nature of.=the cargo, he Was in-
formed that it was money. 20 According to Roman Milian Rodriguez
the; station: managers for the- airlines were in the employ of Gener-
al -Noriega, thus insuring that the currency cargos received special
protection. Noriega also maintained an ownership interest in the
armored car-business that met the planes at the airport. 21

After being laundered, many of the drug profits of the Cartel de-
posited in Panamanian financial institutions found their way back
to Colombia where they were invested in newspapers, radio sta-
tions, television stations, soccer, teams, pharmaceutical firms, auto-
mobile agencies^and construction companies. 22

One Money Laitnderer's Experience

In his Subcommittee testimony, Milian Rodriguez described his
career as a money-launderer arid explained the techniques used by
the major traffickers to handle and invest their money. As an ac-
countant in Miami, Milian Rodriguez attracted business from mem-
bers of the Cuban exile community who had turned from shellfish-
ing to drug trafficking during the 1970's. 23 ;

Beginning on a modest scale, Milian Rodriguez took the responsi-
bility for counting, packaging and shipping his client's money to
Panama, where the funds were deposited in a local hank. Typically,
Rodriguez set up the account at the Panainanian bank in the name
of ^Panamanian corporation created for the sole purpose of receiv-
ing the orie time Currency deposit! 24 Shortly after the initial depos-
it, the. moriey would then be moved to another group of accounts in
the same bank through a cash withdrawal in the form of a teller's
receipt. This transaction did not leave a paper trail to^the receiving
accounts. The money^would then be moved "to a second bank in the
form of teller's notes and deposited to the account of another group
of "dummy" Panamanian corporations, further hiding the source
of the funds. 25 From there, it was transferred to a visible, and on
the surface, legitimate investment corporation in the Netherlands
Antilles. 26 -That corporation would in turn purchase a wide range of
assets as. passive investments, including luxury real, estate, stocks
and bonds, and other financial instruments. 27

ia Ibid., p. 39-40.

20 Subcommittee testimony of Gerald Loeb, February 8, 1988, pp. 131-132, 143

31 Subcommittee testimony of Ramon Milian Rodriguez, February 11, 1988, pp 235 247 and
closed testimony June 26, 1987^, p. 91.

22 Subcommittee testimony of Ramon Milian Rodriguez, April 6, 1988, p. 45

^°? lmittee tes^ony pf Ramon Mffian-Rbdriguez, February 9, 1988, pp. 220-221- see also
Mihan-Rodnguez. rodictment and related-documents in U.S.-w. Fitle Million Four Hundred Forty
Seven Thousand, Nine Hundred Forty Nine Dollars, No. 83-1652 Civ-JWK, and U.S v Rodri-
guez, both US District Court for Southern District of Florida

2 *Ibid., pp. 24-25, 36-40.

^Ibid., pp. 41, 45-46 and testimony of April. 6, 1988, pp. 40-41
^RMR testimony of February 11, 1988, p. 49.

M Subcommittee testimony of Ramon Mnian Rodriguez, April 6, 1988, p. 45.

118

Mltfan-Rodriguez ^testified /that in 1979 he established a cash
management system for Pablo Escobar, a key figure in the ^Medel-
lin iJartel. 2 * .MUian Rodriguez designed this system to maximize
profit and interest, and minimize risk. As she described it, currency
received .from wholesale cocaine purchases-was -delivered to cartel
operatives in the major cities around the United States: These
"cutouts" in turn passed, the money to messengers' wnofdelivere'd it
to safehouses, where Colombians counted- -'and. bilntili$d !, £life' moriey
and shipped it to consolidation points for shipment^ to' Panama.^ 9

The packaging .and shipment of currency was. handled' by^freight
forwarding companies owned by the Cartel. 30 Miha^-Rodriguez pro-
vided the subcommittee" with cardboard boxes that had ^been de-
signed to exact dimensions for packing, money and carried the logo
of the captive freight forwarder. 31 ■» : =, 1

Milian Rodriguez was convicted under federal RICO statutes as a
money lauhderer and sentenced to 43 years in federal prison. In
May 1983, he was arrested with $5.4 million in cash as he -attempt-
ed to leave Fort Lauderdale for Panama on his personal Lear jet.
At thetime of his arrest, federal authorities touted him as the big-
gest drug money launderer apprehended, in Florida.

The U.S. Response To The PrObiiEM " : -

By the time the Subcommittee on Narcotics and Terrorism began
its investigation, the use of offshore banks by drug traffickers al-
ready had received significant attention by Congress. Beginning in
1982* the Permanent Subcommittee on Investigations of the Senate
Government Affairs Committee undertook a major investigation of
the use- i>f banks, trusts =and companies in offshore bank secrecy ju-
risdictions by drug runners. In the case of Panama, the Subcommit-
tee concluded that- 'fthe evidence indicates that a significant per-
centage, of the currency [in circulation? in 'Panama] was drug
money.': •• • -

Iri : the House of Representatives, Congressman George Wortley
(R-NY), a member ofothe Banldrig Committee, introduced a propos-
al which would have authorized the Treasury Secretary to subject
a wide range of foreign financial institutions,' including branches,
subsidiaries, and 1 affiliates of institutions doing business in the
United States, to the record-keeping and reporting requirements of
the Bank Secrecy Act. The House Banking Committee included this
proposal in H.R. 5176* the money laundering bill that it reported in
August 1986. According, to the Committee report (H.R. Report No.
746, 99th Congress, 2nd Session, 34):

By including Section 6(a). in the bill, the Committee's
intent is to send a clear and unmistakable message that it '■
expects United States financial institutions doing business r
in this country to not only abide by the letter of the law
but to live up to their moral responsibility to fully cooper-

2S Ibid., pp. 20, 22.
^Ibid., pp. S6-39.
30 Ibid., p. 40.

"KMR Subcommittee testimony of April 6, 1988,-p. 28. '

119

Sg of o^gs." Untry ' S ef£0TtS to " Stamp ° Ut the Mdt

provision was mcluded [Sec, 1363, Subsection (c)] wbA retted
the Secretary of ^the Treasury to report to Congress within one war
on the extent to which foreign' branches are used to fecilitS

S S t^ eyad ^ he ^ POrtiDg -^e^ntslf iT^k
,vw£% :J°i exa ™ me ^ issue of extraterritoriality '■ and Ito
mentf obtaining the-cooperation of for^' govern"

^S^Kncnef^^^^S

cuite 'mS^ of ta ^ 6r T ted ^ " because ^ no ac-

curate means of determining how much money is lfl»n<wli

through each type of financial institution, TreSuryVn off™ no re

hable estimates on the amount of money that ray be laundered

through foreign branches of domestic financial ^stifetion!"

. Effectiveness of Cukbent Repostmg Requikements

hi the wake of indictments of a number of prominent TT =! fi™„
cial institutions for their failure to abide bv the^SnWi • aD ~
ments of the Bank Secrecy A* feS^in SSSr
prune to deposit large sun? of cash ^out pro^f b^Lfor"

ports^CTR), are now being filed at a rate oFne^mJo^

j But ; while these laws have been extremely effective in fi^ti MfT
d^tnbutors of illegal, narcotics in the UniWState T a mjof^l
hole has made .them, entirely ineffective against drug smuilp£
who operate from foreign sanctuaries As the^nh^Jl^ g ? ?
mony detailed, the ^^UiE^^^^^^l^
the money, generated by drug sales out of the US for d^nosit in
countries with strict bank secrecy laws and th™ aW ■
£ansfer the^fonds back to theSMifc to^S
fully invested in income-producing assets. 7

120

.Summary and. Conclusions ,

To function, the criminal organizations which "control the drug
business must have access to commercial 1 banks -willing to take
large amounts, of U.S. currency anonymously.; Moreover, they must
be able to keep secret the identity of the beneficial owners of the
secret accounts. Restricting thesertwo essential, requirements: for
successful money laundering activities^ even imperfectly, is.the
most important action the United States governments can-t^e-m
challenging seriously the operations of the large traffickers. ■ . ■ "

. 'Eh© Subcommittee on '.Narcotics and .Terrorism therefore pro-
posed' tnatrthe Secretary of the Treasury negotiate agreements, per-
mitting foreign banks to cooperate with narcotics investiga-
tions. As a result of an amendment sponsored by the chairman and
ranking member of the Subcommittee (Senator John,-F. Kerry and
Senator Mitch McCormell), legislation incorporating this, proposal
was included in tjie Omnibus Drug Bill ' passed at the. clpse of -the
100th Congress after passing 'the Senate by a vote of 85 toft

All banks— both U.S.; arid foreign-owned— which, do business in
the United States, should be required to record ;1J.S. cash deposits
in excess of $10,000 as a condition of . their U.S. charter or their
right to transfer funds electronically into, this country. The prompt
negotiations'- of -'such agreements with other countries, as mandated
by the Omnibus Drug Bill of 1988, should be undertaken. " ^

It is the belief of the members of , the Subcommittee that these
agreements will ensure that banks maintain a record on the identi-
ty of anyone who conducts a cash transaction in excess of $10;000.
The records of such transactions would be requested only in con-
nection with a narcotics investigation. Institutions which choose
not to comply with this requirement should be denied access 4%the
U.S. banking ^market and ..the financial . wire transfer network
maintained by the Federal Reserve. .

LAW ENFORCEMENT VS. NATIONAL SECURITY: CONFUSED

PRIORITIES

Introduction

The Subcommittee identified a number of cases in which law en-
forcement operations and criminal prosecutions were subordinated
to other foreign policy' concerns. More often than. not,, the interfer-
ence with law enforcement processes was the. result of ad.hbc .deci-
sions 'made at the operational level, of the. national' sectuily ageif
cies involved, rather than the product of carefully': considered deci-
sions made at%e highest levels of our government/ ;

Instances in' which foreign policy considerations" took precedence
over the war on. drugs included the Barry Adler Seal episode, law
enforcement investigations into illegal activities' "associated with
the Contras on the Southern Front, a narcotics sting operation di-
rected at a high Bahamian government official, the intervention' of
U.S; ! officials on behalf of the Honduran General convicted in a
narco^terrorism plot, and the handling of Panania's General
Manuel Antonio Noriega. (Accounts 'of the Bahamian sting , and
General Noriega were provided in the Bahamas and Panama chap-
ters respectively.)

121

Bakry Seal and the Cartel

^Ja^ Adler S ?^' a former narcotics smuggler, was utilized as an

^TZT^l ^ DEA ^ a sensitive operation bei^g

run against the Colombian cocaine cartels and officials of the San-

^Si a J QgUn ^ ^P^t Based upon diligence the DEA had
received an interest ^had been, expressed by some members of the
Sandimsta Directorate m providing a base of operations- in Nicara-

■SS&Si^K f neDQbei g °l the cart ? ls ^ d Sandinista officials in a
drug sting being run by Seal.

i a ^ 6VeT ^% 0p ? a ^°H ^ d ^ clos ed prematurely- by ah admin-
w!hT ■°o Bc r 1 . Wh ° le l k 2 d , to .% press evidence supposedly , col-
lo^nn y r^ m .| n T ? ffort to influence a pending Congressional
vote on Contra aid.. Law enforcement officials were furious that
then _ undercover operation was. revealed and agents' Hves jeopard-
% e *l™ a UffJ>™jndiviaual m the U.S. government-^. Col. Oliver
North— decided to play pohtics with the issue. 1

Associates^ of Seal, who operated aircraft service businesses at
the Mena Arkansas airport, were also the targets of grand iurv
probes into narcotics trafficking. Despite the avaflabiHty of evi-
dence sufficient for an indictment on money laundering charges
and oyer the strong protests of State, and federal law enforcement
officials, the cases were dropped. 53 The apparent reason was that
the prosecution might have -revealed national security information
even though all of the crimes which were the focus of the SvcS
tion occurred before Seal became a federal informant.

Bueso-Rosa and the Contras

Senior U.S. Government officials intervened with a federal judge
to obtain^ reduction to five years hv the sentence for Honduran
General Jose Bueso-Rosa, who was convicted in 1985 of conspirine
to assassinate President Suazo Cordoba of Honduras. The assassi?
nation attempt was to have heen financed by the proceeds from, the
sale in the .United States of $40 million in cocaine seized m co^neS
tion with the plot. The other defendants in the case received W
tences as long as forty years.

+w ^ dditi< S' offi cials j0 f the U.S. government intervened to ensure
that Bueso-Rosa served out his sentence in a minimum security fa-
culty at a U.S. military base in Florida. The officials intervened be-
Z^J^S^f^? 3 ? £ en T d ° f the U ' S - government and had
t #5 J? 4 ^ he l P J? ^eU-S military m Honduras. According
to the Admissions of the Umted States in the criminal trialof -
Oliver North <%t , Col North suggested that efforts be mad? on

Sj^qS!^^ him from disclosing deta0s of

These officials seemed unconcerned that, the Justice Department
had touted the conspiracy as the "most significant case of narco-
terronsm yet discovered. 4

1 Subcommittee testimony of John C. Lawn. July 12, 1988, pp 134-135
ka^^an'ot.T^ 8 **>^**«* ^'enforcement agents in Mena, A,
a Admissio ns, U.S. y. North, DC District Court, 1989, # 102
Subcommittee testimony of Francis McNeil, Part 3, April 4, 1988, pp. 44-49.

122

Mr. Mark M. Richard, the Deputy Assistant Attorney General of
the Criminal Division for the Department of Justice was adamant-
ly opposed to these interventions. Originally, the Department of
Stkte ; supported the Justice Department's position in the'Bueso-
Rosa ? case. Richard said that early on the Pentagon took the initia-
tive in-suppbrt o'f interventions on behalf of Bueso-Rosa. j, '

In a. deposition before the Iran/Contra Committee, Richard Re-
called being called.to a irieeting which mcluaed/ araong others,
Oliver -North, General "Paul Gorman, Elliott Abrams, ;and DeWey
: Qarridge, who was representing the CIAv'In' tHat" meeting 'Noi$h,
Gorman, Abrams and Clarridge all agreed that Bueso-Rosa should
be accommodated." Richard said He ;j was surprised that the State' De-
partment's' position had changed. Richard said he' responded; by
saying: ' ' ^

took . . ^ythjng wedo for this man: seems to undercut .
-.;, r our position that we. have repeatedly taken that this is an ; >
international terrorist. This is - .pertainly not: consistent
with .the position we have, .articulated, throughout the,
course of this prosecution^ that this man is a» serious inter- . -
national terrorist/and should be treated accordingly. 5 -

■ Francis McNeil, in. testimony before the Subcommittee 7 said the,
successful intervention' on behalf of Bueso-R6sa, over the objections
of the^Justice Department, uhdermmed President Pagan's 'policies
in three areas': anti-terrorisih,' anti-narcoticsV" and supports for de-
mocracy. ' ' • •< ' 1

Intelligence vs. Law Enforcement

Despite obvious and widespread trafficking through the war
zones of northern Costa Rica, the Subconnnittee Was unable to find
a single case against a r drug trafficker-' operating in those zones
which was made oh the. basis of a tip or report by an official of a
U.S. intelligence agency. This is despite ari executive ordefc requir-
ing intelligence agencies ^ ! report trafficking' to law enticement
officials and "despite direct tes&mony thai trafficking on the. South-
ern Front was reported to CIA officials. 6 ; ^

Where traffickers and suspected traffickers were mentioned? by
name in dbcumerits divulged in /the course, of "the Iran-Contr a, hear-
ings, the hames^were deleted by the authorities charged with docu-
ment dedassification. This deletion was effected/ notMthstanding
the fact that a copy of a. memorandum detailing the trafficking acr
tivities written by Rob' Owen and sent to' Oliver Npr^had already-
been widely circulated. 7 . ; ! : J . '

Assistant U.S. Attorney Jeffery Feldman '.ahjd FBI Special Agent
Kevin Currier were sent to San Jose in"1986 to investigate illegal
weapons shipments to the Contras operating in" Costa liica.. Yet,
U.S. embassy officials were not on^y unsympathetic mth. their bb 7
jectives but also attempted to dissuade them from interviewing. -a
key witness. -

? Iran'/ Contra depositionof Mark M. Riphard, Appendix B, Volume 23, -August 19, 1987, pp.
'2—128.

B Lawn testimony, pp. 115-116, 118. . ■

T April 1, 1985 Owen memorandum to North, Iran-Contra exhibit Robert W.Qwne 7.

123

^J^J^^l ^ lchard Gre S orie said that the failure of the
£ Departm ? nt to *™ ™er important materials was jeopardS
mg the prosecution in his case against Sarkis Soghenalianfan^rS
dealer. Gregorie testified that the case against GeneiS NoriSf
could well be jeopardized if U.S. intelligence ag^ndeTfailedlo
icTSatog.^ hlformation about the General's ro?in narco^

Jt is impossible [to know with certainty] in a world
, where the secret to conducting intelligence activity is com-
knVw bask ™ > 18 you get formation on a need to

n ' ■ • & a compartment goes out of wack, that is if they
go off on their own wild spree, there is nobody to supervise
them. And if it happens that Mr. Noriega was working for
a compartment I don't know about and their superiors in
other departments don't know about, there may be a
whole source of information unknown to the prosecutor.
Gregorie, referring to the CIA, went on to say, ". with the
Noriega case we have requested the right to see certain Sings I
can honestiy tell you that I am convinced that we have nTSen
even a small percentage of what we should see."

Misguided Priorities

qWM ^ nforc ^ ment operations directed at narcotics traffickers
should be a clear government priority. Law enforcement agents

J™uL f ™ n £ m r> day ?* ^ day-out, of the war on Ks
should be secure in the knowledge that as they develop evidence on
anyone associated with the drug trade, then- effort ^ not be
Sions ° T terminated for ^-called Clonal se^ri^onsider!

J^£a$ graphic example of tins conflict between law enforce-
Sf^JS for eifn Pohcy priorities is that of Richard Gregorie, who

SS I* 6 W r ° n ™ the U ' S - Forney's office £

JfST* ?! achieved a reputation as one of the nation's most
effective and toughest federal narcotics prosecutors

Yet, Gregorie in frustration, resigned his position in January of
fen* ^ ^fWPS opposition he was meeting from the
official investigations and indictments of fSe^

In an interview with NBC, .aired on February 22, 1989, Gregorfi
said the opposition from the State Department made it awfim- J
"T°-^ % °^ UT li e *°P cocai * e bos ses. He stated, in that interview-
_ I am fining the higher we go, the further I investigate matters
mvolvmg Panama high level corruption in Colombia, L HoSEST
in the Bahamas, they are concerned that we are going to cause a

SSSXS^SSSffi-" 4 that ™

Gregorie said he felt a lot like the, soldiers in Vietnam felt "We
are not being allowed to win this -war." 8

8 NBC News interview with Richard Gregorie, February 22, 1989.

124

The Drug Enforcement Administration Has expressed a clear re-
luctance- to develop cases against' officials of foreign governments
because of that agency's status as a guest in the countries where it
operates. Many law enforcement officials in south Florida have
been discouraged in pursuing cases that lead -to. the Bahamas be-
cause of past interventions by the foreign policy .agencies, of our
government.

When cases are brought against those involved in the drug trade,
prosecutors should he "able to rely upon the cooperation of all the
agencies of the Federal government to assist them in indictments
and prosecutions/ Gbviouily, secrecy is' essential to maintainmg the
security of certain U.S. government operations. However, the con-
cern for-secrecy and the heed for the classification of important na-
tional security information should hot be an insurmountable obsta-
cle for prosecutors in their ability to obtain evidence critical in
waging a more effective war on drugs.

In addition, the Nicaraguan war complicated law enforcement ef-
forts, particularly in south Florida, at a time when the illicit nar-
cotics trade mushroomed put of control. A unique problem surfaced
with the privatization of U.S. foreign,policy in Central America,}at
the direction of lit. Col. Oliver North. The following! section to this
chapter discusses the nature of this problem. ; '

The Consequences of Privatizing U.S. Foreign PoiIcy '

A major consequences of privatizing. support for the Contras, par-
ticularly during the Boland Amendment prohibition on' official U.S.
government assistance, was that, it attracted numerous individuals
and organizations involved in illicit, activities.

As revealed, during the Iran/ Contra hearings, an extensive net-
work of private support.,fqr the, Contras was established and cbdrdi-
natea" by a handful" of government officials working with private or-
ganizations. .Although it might have.been unintended, this private
support network', encouraged by certain officials of the U.S. Gov-
ernment, served as a magnet for many individuals" who exploited
their activities on behalf of the Contras as a cover for illegal gun-
running and narcotics trafficking. It appears that anyone or any
organization was. welcomed 'as participants in supporting the
Contra cause.

The private efforts on behalf of the Contras attracted a number
of drug traffickers who understood full well the high priority the
U.S. government gave to the war against Nicaragua. Testimony
beforef the Subcommittee revealed narcotics traffickers were par-
ticularly astute in offering to assist the Contras in an effort to hot
only protect their operations^ but also to avoid' prosecution for their
activities as well. This technique is known as "ticket punching." "

In the environment of South Florida, with exiles from around
Latin America plotting a variety of activities -aimed at toppling
left-wing regimes around the hemisphere, and with legal and ille-
gal covert operations a commonplace, the opportunities for ticket
punching are endless. According to Richard Gregorie of the U.S.
Attorney's office in Miami, the result is a prosecutor's nightmare. 9

Testimony of Richard D: Gregorie, July 12, 1988, pp. 156-163.

125

SSJ?^ trafi «J ln S were the result of efforts by traffickers tc , «
tabhsh a cover for their operations by 'WvW'Z??, 5"
aC C o e n S ^ * ^Monjry groups les^fr help"* ^

ca^^Lf W^ Si * he C0 ^ Ct ? d cocaine-trafBcker, was quite

relationship with the Conge/ieX^Il^e^Mor^&z*
dW^' 01 C ° ntra ^-t-cture^enhlnc 1 ?^
fi.5^ S u-'„ whicl ? was the headquarters for the floyd Carlton/Al

Place heCe^^^Zife^'S^ wWch ^

teft:«9" *° ^ Contras in violate rfthTNeu!
traiity Act. All claimed, they were acting on behalf »t>H Zu-i , «T

126

The Case of Michael Palmer

The most, puzzling example of this phenomenon the Subcommit-
tee encountered was the case of Michael Palmer. Palmer's career
as a drug smuggler also , included numerous government associa-
tions' that clearly revealed a government working at cross-purposes.

Palmer was a former Delta, airlines flight engineer who went'
into the marijuana business with Leigh Ritch and Michael Vogej in
the late 1960's. He 'participated in the smuggliisg of hundreds' of
tons' of marijuana' into the" United States Over a six-year 'period
without getting caught. . • 1 : ' .

fii 1984, he; flew to Colombia with a load of money 'to purchase a
large shipment of marijuana.; The plane was trapped;on the ground
by the Colpnibian military and Palmer was, thrown 'into jail. 13 As
he sat in jail he had the chance to contemplate the risks ' he
faced. 14 Thete was . a stror^; probability that hfe/brganizatib^ had .
been gompromised and that, one or more 4 pf its members were work-
ing with the police. He risked being identified as the key figure in
a multi-billion dollar drug ring and face a possible lifejsehtent$e.'

For Palmer the message was clear: Get_ F out of jail- in Colombia
and go "to work for the U.S. government. Depending on the story
onb chooses to believe, Palmer was either released ^because the Co r
lombians had no case against him or because hfciriends paid, -off
Colpfobian^ officials. Upon his return to the United States he told
his former colleagues that, he was; retiring and promptly looked for
government agencies which would be able to use his services. 15

Palmer's major assets were an interest ih a DC-6 which had
Been" mvolved in drug.smuggling operations, an interest in Vortex,
a minor Miami-based air cargo business, and excellent, connections
in the drug world. 1 6 Within a matter of months ' after his return" to '
the United States, Palmer was handling; "humanitarian" cargoes
for the State Department, working for the 1 Drug Enforcement Ad-
ministration, and informing for an office of the Customs/ Service;

Palmer's decision to become a government informant _was pre-;
scient because he was in facViridicted in Detroit for his role in the
marijuana smuggling operation. His ploy worked. Over the objec-
tions of law enforcement agencies involved in the case against him,
Palmer's indictment was dropped as "not being in the ititerest of
the United States." ^

Throughout Palmer's career as a government informant the vari-
ous agencies usmg him did riot seem/to know that he was involved'
hi riaore than brie operation with more than one agency. In fact,
some agencies .were tracking him as a smuggler unaware that he
was doing the smuggling for DEA. Palmer's varied government op-
erations all involved using - the' same airplane. The results were -
chaos and confusion. 17

The DC-6 which was the centerpiece of Palmer's operation had
been purchased in 1979 and hadbeeh used to pick up a multi-ton.
load of marijuana in Colombia. The plane was overloaded and hit

13 Subcommittee testimony of Michael Palmer, Part 3, April 6, 1988, p. 202.

14 Ibid.; p. 204.

" Ibid., pp. 202-203, and Subcommittee testimony of Micbael Vogel, April 5, 1988, p. 114.
1 « Palmer, ibid, pp. 197-498.-
" Ibid., pp. 215-216.

127

some trees and shrubs as it took off from- Colombia. According to
Michael Vogel Palmer's partner, the plane flew north wi§Ttree
™ «* of the wings. .The intended Tdelw

W*T? ^ r ^Tf 586 * but ^ ecause of damage the crew
had to dump the joad of drugs over a small town in Georgia »

Theyplane landed in Tallahassee and the occupants fled before
the police closed m. The plane was seized and left on the r unway at
Tallahassee for several years before it was retrieved from™ gov-
ernment by Peer's lawyer. Palmer invested a substantial sun? of
money m rebuilding the plane and gave it to Vortex's Steve Her-
reros in exchange for an interest in his company. Herreros hadlev-
^f ht extracts for which he could use the plane" ?
When Palmer decided to-become ah informant the plane became
an essential ^art of the plan. DEA wanted .him to fly to Colomfcl
where^e pW would be used to entrap a ColombL smuSg

waf ■sS e ba^°Sfeor eed to ^ mar ™ - d AaS

*S£2W& SmsKl the DEA m not proper * -

,^T diDg to P f^ er > Customs agents in Detroit who did not

fcS J^H° ? * mg £ r th l g0VeTmnent came close ^ shootmg
fiS ^ e ^ m §- U l:^ h ? Operation before the DEA could

^ sting^o° thB dastab,ltora were and before DEA could complete

«tW rt^fS? 1 ? 'ras flying drugs as part of a DEA

sting the DC-6 was being used for State Department humanitarian
assistance flighte to the Contrast Member^ of the press cTrpThS
1^1 h^l^ ^ *^ e ™ d ^cted that the plane was*! key
Imk between^ drug trade and the covert war in Central Amer-

bSkgroln^ 0 ^ ^ ™ d hegm to ^estigate Pa Ws

nl^^ 6 ^^^ 6 and ^ P^er were repainting the

Eal nftL C ^ gmg £ nUmb6r ? t0 make lt less conspicuous
Each of the tail number changes and new paint jobs was recorded
by a professional photographer at the Miami airport who makes
S^^^ons made in the apSLn^of^

Vn^f^ m j? 6 aiiports famous "corrosion corner." ^
known to the covert operators or the DEA, the photographer sold

vTk °l the piCtUr6S to the press which was now sureTS Se
link. between covert operations, and drug trafficking

On one occasion, the plane returned 'from Central America and -
was subjected to a careful search at the Miami aiiportW pto
protested claiming that the search endangered sophLticated ^ navi-
gation equipment which had been installed for government op5-

ftion ThM*** W ^ b - emg D8ed ° n 311 0fficial governmentW
?W p2£f Customs o ffi ciak were incredulous because they knew
that Palmer was under mdictment in Detroit in a huge nSrijSSS

11 ^ im0 - n ^ of M!rTl " wrf V °S<* PP- 101-102, m 100-773, pt 3
1U Ibid, p. 197. r

20 Ibid., pp. 220-224.

21 Ibid., p. 208.

128

smuggling case. To their amazement, Palmer got the government
to acknowledge the plane. 22 ■ -

■ As the public controversy about Palmer grew; the different law
enforcement agencies^ involved with" the case could hot -agree" on
how it should be handled. DEA wanted his Detroit case dropped be-
cause of his undercover work, while other agencies suspected that
he was contmuihg his own -drug business "using his work for the
DEA as cover. * -

The Detroit prosecutor decided to drop the charges against
Palmer, a decision which infuriated Palmer's former partners in
the marijuana business who all received long prison terms. 23 .

The Case of Frank Camper

The story of Frank Camper is one clear example of how "the pri-
vatization of foreign policy could lead to tragedy.

Camper is a Vietnam veteran who began working as an inform-
ant out of Birmingham, Alabama for the FBI in the early 1970s. In
1980, Camper decided to establish "a private school for people who
would be interested in paramilitary work," which he called "the
Mercenary School." 24 ; - "

- Advertising in publications like "Soldier of Fortune," "Gfting
Ho," and "Eagle," Camper conducted two-week paramilitary trains
ing courses for individuals and groups . . While training these in-
dividuals, Camper was acting as an informant for the FBI and mili-
tary intelligence.

The training provided by Camper included instruction in assassi-
nation techniques, , the use of plastic explosives, and various bomb-
ing techniques. 25 * ;

From the beginning, the Camper school attracted 1 violent' and ex-
treme elements. Among Camper's first students was R6bert -liis-
benby, who according to Camper was planning a public bombing
and assassination in Miami. Camper informed law- enforcement
agents and the plot was halted. Crther Camper students "used the
techniques that they had learned" at his school to steal items from
the Redstone Military Base in northern Alabama. 26 fi; . 7

According to Camper, he founded the school with" two principals
in mind. First, to "ehable r5 £he U.S.; Government to gain a great deal
of intelligence 7 and indeed initiate many operations that were suc-
cessful to stop criminals and terrorists;" Second, "to get and prove
out possible foreigners wha, would work for the" U.S. Government in''
the future." 2 ^ Between 1981 an4 1986/ Camper received approxi-
mately more than $25,000 from the U.S. Government in connection
with these operations. 28

As Camper's school- became increasingly well-known, he found
himself being drawn into contact with representatives Of foreign,
governments and with the Contra program. "

" Ibid., pp. 229-230.

33 Vogel, ibid, pp. 113, 117.

2-1 Subcommittee testimony of Frank Camper, Part 4, pp. 287-288.
zs Camper, Part 4, p. 301.

26 Camper, p. 289.

27 Ibid., p. 301.
Ibid.

129

Camper testified that in 1984, he was approached by members of
the Panamanian Defense Forces who wanted him to participate in
training programs for PDF anti-terrorism commando units.
Camper said he learned during a meeting in Panama, that the PDF
was working with the Medellin cocaine cartel, and reported this in-
formation to military intelligence. Camper claimed that military
intelligence did not follow up on the information he had provided
them.? 9

The same year, the Civilian Military Assistance Group ("CMA")
of Decatur, Georgia, began sending individuals -who wanted to fight
with the Contras to train with Camper for "deep penetration raids
into Nicaragua/' These individuals were later expelled- from Hon-
duras. Camper also trained members of CMA who went to fight
with the Contras on the Southern Front, working with John Hull?
Among them were British mercenaries Peter Glibbery and John
Davies, who were, arrested by Costa Rican officials in April, 1985
after conducting a raid in Nicaragua. 30

Camper also participated in training members of an exile group
attempting to conduct a coup L against the Ghanian government.
These individuals were later arrested on a barge off the coast of
Brazil as they were heading for Ghana, and imprisoned. 31

In November 1984, four Sikh nationalists were trained at Camp-
er's school. The Sikh's asked Camper .to train, them in guerrilla tac-
tics for a war against the government of India following the assas-
sination of Indira Ghandi and the Indian government's assault on
the Sikh Golden Temple. Camper advised the FBI of the Sikh's
plans. Camper testified the FBI advised hiih to continue training
the Sikhs as a means of mrimtoriogj their activities. Camper testi-
fied that as a result of this monitoring the. FBI was able~to stop
planned assassinations, of Rajiv Ghahdi and an Indian state minis-
ter, and that many of tjie Sikh "terrorists'-' were arrested. Other
Sikhs trained by the Camper school- escaped. According to Camper,
the Sikhs used -plastic explosives they obtained" from his school to
blow up Air India Flight 182 over the Atlantic in June, 1985, kill-
ing 329 people. 32

- Camper's school was closed after he was arrested in 1986 oh
weapons and racketeering charges in connection with a Los Ange-
les bombing. 33 "

The Frank Camper story exemplifies many_-of the perils of the
privatization of' foreign policy. While being monitored by the FBI
and the .military, Camper was permitted to train individuals who
participated in military expeditions,; attempted coups, -and bomb-
ings involving many nations; While the missions were clearly not
authorized by the U.S., many of them were tolerated in a period
that U.S. foreign policymakers were seeking to engage the U.S. in
a variety of low-intensity conflicts using a mixture of private and
public resources.

The tragic irony is that Camper's school was the source- for the
training and plastic explosives used to blow np the Air India plane.

29 Ibid., pp. 291-294.

^.Camper, Part 4. pp. 295-296; see also Iran/Contra Testimony of Tom Posey, Vol. 21, p. 125.

31 Camper, Part 4, pp. S02-303.

32 Camper, Part 4. pp. 302-304.

33 Ibid., pp, 307, 320. ^

130

This occurred even though the operation; was being monitored by
the FBi, and highlights the '-"risks of permitting prjyate inilitary
training camps to operate in the" United 'States*

The Case of Richard Brenneke

Certainly; one of the unintended -consequences of the ? privatiza-
tion of U.S. policy toward Nicaragua, were the number of individ-
uals who surfaced claiming to have been "engaged in illicit activities
on behalf of federal agencies supporting the<Contras; One such in-
dividual was Richard Brenneke. . '- _ "-"

Brenrieke is the President of a- Pdrtland, "Oregon ; property man-
agement' company. According to him, in :Ms spare time' he had been
involved '-'in arm's deals in the Middle Eastland Central America
and as a participant iriva, number of covert operations. ;

Brenneke' first came to the Subcommittee^ attention 1 through
Will Northrop, , one of the defendants in the'*'Eyans" Iranian arms
sale case in New York- Brenneke was the source for a "lengthy iVeu;
York Times story on weapons sales to Iran. In that story he re-
counted his _ purported role in the/ ^emevand" project, which'Jjte
said was the code name for a weapons purchasing operauorf mnvby
the Iranian government. ' ' „ ; : " " , - ; , : .

; S6me mbhths later Brenneke 1?egan to assert publicly that' he
had participated in %guns for drug arrangement in Central Amer--
ica which, was officially sanctioned by the U.S. government. J4s part
^of this arrangement he; said ne had smuggled, drugs into the United
States and arranged weapons purchases for the Contras in. Eastern
Europe., . ... :v \. - ., ^, j I - t . ' -\l '. . -. -. ,

. : As- the resuE,pf these "new^.. assertions the staff ^cootacted, Mr.
Brenneke who .agreed to : be^diposed- The deposition ^was taken- on
April.23/ 1988: mPortianO,- Oregon, - : . '

In ids. testimony. Brenrieke asserted that he had forked, for the
CIA as a contract employee in the Middle East ins the ,1970's, -that
he became involved working for Israeli intelligence and the'^LA in
the early 1980's. He claimed that ia the course .o&his dealings he
was asked by the Israelis to make -arrangements for the purchase
and shipment of Eastern European weapons to the Contras. He
said that, after clearing the request. -with the CIA " he bought the
weapons from Omnipol- in. Czechoslovakia,. andi-h'ad the weapons
shipped =to a warehouse in Bolivia. J He said that the Israelis then
flew the weapons to Panama and Honduras. :i : '-" > ■ • m r

-Brenneke' said that-he had worked closely with^a .nuihber ofels-
raeli agents active in- the Central - American' weapons 3 project who
were running drugs into the United States.* He saidittiat : He was
told by White House' officials that the "Operation was officially" sanc-
tioned, and he had personally discussed the operation with mem-
bers of the Vice President's "staff. .*

The Subcommittee then began an exhaustive- effort to determine
whether Brenneke's sworn statement had any basis in fact. Dozens
of individuals whom Brenneke hfld named in his deposition were
interviewed, ' thousands : of pages of documents from gbyernntent
files relating to him and thousands more from his flies and other
sources were reviewed.

131

A careful analysis of the files shows that he spent considerable
effort unsuccessfully in trying to become an intelligence agent and
when that failed, an arms dealer. The records show that Brenneke
was never officially connected to U.S. intelligence and that he was
never tasked by a U.S. Intelligence agency to gather information.
Although Brenneke produced thousands of pages of documents re-
lating to proposed arms deals, there is no evidence that any of
them ever came to fruition.

Brenneke began telling stories about his "secret" life as a spy
sometime, after he was stopped by the Customs service coming
through the Seattle airport on a return trip from Europe. He was
carrying a briefcase which contained references to arms deals. The
Customs Service wanted to know whether he was involved in ille-
gal weapons transactions. His response was to offer to become a
Customs informant.

The Subcommittee confirmed that Brenneke applied for a job
with the CIA when he finished school but his application was re-
jected. He worked for an international banker and securities dealer
and spent some time in the Middle East and Central America. As
the result of his employment he developed contacts in the world of
international arms dealers.

When the Iran/Iraq war intensified the adversaries went into
the world market to buy weapons. A* number of Brenneke's old con-
tacts asked him to join them in their efforts to sell weapons to both
sides. Brenneke traveled to Europe and met with his old contacts
and with representatives of both the Iranian and Iraqi arms pur-
chasing missions- He traveled to Czechoslovakia and met with rep-
resentatives of Omnipol, the Czech arms company.

Although Brenneke's files are filled with evidence of this travel
and of correspondence arranging meetings he did not produce any
evidence of any business transacted. There are no signed contracts,
invoices, shipping instructions, delivery records, end user ~certifi-
cates whether real or falsified, or financial records of any kind to
support the assertion that he was an active participant in arms de^
liveries to either Iran or Iraq.

Moreover, Brenneke did not produce any evidence that he was
reimbursed for any of the expenses he incurred while trying to ar-
range arms deals.

It appears that Brenneke learned about the secret U.S. arms
deals with Iran from his business associates who in turn had
learned about them from the Iranians. It also appears that Bren-
neke received completely fabricated information about arms deals
from undercover agents of the Customs Service who were setting
up a sting operation and were talking to his business associates.

When direct efforts to arrange the arms deals failed, Brenneke
began to tell every agency of the U.S. government which would
listen that he could get the hostages in. Lebanon released. In ex-
change, he wanted the right to sell weapons to the Iranians. Ap-
proaches were made through Marine Corps Intelligence, the State
Department's Office of Trade and Commercial Affairs, and the De-
fense Department. These approaches were all passed on to the Cus-
toms Service, which, at that time, was in the process of preparing
the "Sam Evans" case in New York.

(

132

Customs agents interviewed Brenneke extensively, reviewed his
records and decided that he had little to offer. He appears not to
have been indicted in the Evans case because he did not play any
substantive role in the transactions which were at issue.

Undaunted by his failure to secure authority to negotiate with
the Iranians over hostages, Brenneke began to offer additional pro-
posals to various federal agencies, including the '•Defense Depart-
ment to trade the Iranians U.S. weapons for Soviet made 'T-80
tanks. These offers were rejected both because of the negative as-
sessment which had been made of him and Brenneke's demand
that he be allowed to- sell weapons to the Iranians.

- Conclusion

The Senate and Houge Select Committees wfcich were constituted
to investigate the Iran-Contra affair described in detail how the
Oliver North operations imdermined basic U.S. foreign policy ..objec-
tives.

In their Report, the Select Committee noted:

Covert operations of this Government should- only be' di-
rected and conducted by trained professional services that
are accountable to the President and the . Congress. Such
operations should never .be delegated as they were, here, to-.
private citizens in order to evade Governmental restric-
tions. 34

The Select Committee observed further that:

The President set the stage for welcoming a huge dona :
tion for the Contras from a foreign Government — a contri-
bution clearly intended to keep the Contras in the field f
while U.S. aid was barred. The NSC staff thereafter solicit-
ed 'other foreign Governments for military aid, facilitated
the efforts of U.S. fundraisers, to provide lethal assistance •
to _ the contras, and ultimately developed and directed , a
private network that conducted in North's words, "a full
service covert operation" in support of the Contras. 35

The Subcommittee members believe it is important to reinforce
the concerns laid out by the Iran-Contra Committees. Not only did
the actions of the North network undermine our government's < war
on terrorism, but they also damaged the war on drugs. Throughout
the decade of the 1930's, the two threats which have exacted ta
tragic human toll in the lives of our citizens have been the actions
of ? the political terrorists and narco-terrorists. Yet, in the name of
supporting the Contras, we abandoned the responsibility our gpv-
ernment has for protecting our citizens from all threats to their se^
curity and well-being. ,_

Those U.S. officials who were involved in encouraging and active^
ly pursuing the participation of private -individuals and organiza-
tions in the contra supply network, must bear the responsibility for
the illegal activities of those who responded to that call. When ac-

34 Report of the Congressional. Committees Investigating the Iran-Contra Affair, November
1987, p. 16.

"Ibid., 18-19. '

133

countability is sacrificed in support of a cause, control over those
who exploit the situation for their own illicit ends is lost, as well.

Those U.S. officials who turned a blind eye to General Noriega,
who intervened on behalf of General Bueso-Kosa, and who ada-
mantly opposed the investigations of foreign narcotics figures by
honest, hard-working law enforcement officials, must also bear the
responsibility for what is happening in the streets of the United
States today.

As Gregorie stated so succinctly in this interview:

If it was the communists that were taking over South
and Central America, we would have done'somthing about
it. But. it's the drug dealers and therefore they (the govern-
ment) don't see that as a ! significant priority. 36

The casualty list for the continued narrow perception as to what
constitutes threats to the national security of the United States has
grown quite lengthy, particularly with the Iran-Contra episode. It
includes, the people of the -United States who are threatened on a
daily basis by narcotics-related violence sweeping the country
There are few neighborhoods in the United States that are secure
from this threat. It is individuals like Richard Gregorie, an excep-
tionaPpublic servant who tirelessly gave of himself to protect the
citizens of this country, but who finally gave up because his own
government would not allow him to win the "war oh drugs. It is the
credibility of government institutions who turn' a blind eye to do-
mestic and foreign "corruption associated with the international
narcotics trade because of the preception there' are higher foreign
policy priorities which.demand our attention.

In- the en& the Contras themselves became victims of the very
network created to>supp6rt them. .

CONCLUSIONS

National Security Issues

1. International drug trafficking organizations are a threat to U.S.
national security. Our government must first acknowledge the
threat and then establish a more coherent and consistent strate-
gy for dealing with it.

Hearings before the Subcommittee on Narcotics and Terrorism
established that the international drug cartels constitute a serious
threat to the .national security of the United States and, indeed, to
the stability of many of our friends in the Western hemisphere. In
the United States illegal narcotics exact enormous costs in terms of
increased crime, lower economic productivity and general health
problems. In Latin America, the cartels not only create social, and
eonomic instability as;a result of their operations, they have also
demonstrated the capability to undermine government institutions
through corruption and violence-

The drug cartels are multinational in scope and operationcln
many instances, .such as in the case of Colombia, they use the sov-
ereignty of foreign governments as a shield to protect themselves

NBG Nightly News interview with Richard Gregorie, February 22, 1989.

134

from law enforcement activities directed at their operations. In the
past, when the United States has pressed for action on such mat-
ters as the extradition of cartel leaders, the traffickers :haVe been
able to demonstrate, through the use of corruption and violence,
that there is a price to be paid for cooperation between govern-
ments on criminal and legal matters. - - -

The scale of the eartelS' operations and the •dimensions of their
economic, political and military power make these organizations
far more dangerous than any criminal enterprise hi U.S: history.
They.. have access to sophisticated weapons and .intelligence; They
have fielded their own armies, and even have entered into alliances
with a variety": of revolutionary groups and military institutions in
the hemisphere. In many respects, they have taken on the at-
tributes of sovereign governments.

The United States government needs to recognize the enormous
threat these organizations pose to the vital national interest of our
country. The government should consider how to utilize more effec-
tively the various political, 1 economic : and, "if ^ need L be J ," eyen miUtary
options in order, to neutralize the growing power of the cartels.

% In thepasp the United States government has either, failed to ,ac-
- knowledge} or- underestimated., the seriousness, of^the emerging
. threat jo. national security posed by organized drug traffickers.,.
The reasonsjfof this failure should :i>e examined by the Senate
Select , Intelligence Committee, in conjunction with the Senate
Foreign , Relations C^mmiitee,^ determine what steps should
betaken. • ..

The operations of the drug cartels in' the- -1980's exceeded the
scope of all previous organized criminal behavior. The ; Subcommit-
tee received testimony detailing how cartel leaders rented islands
in the Bahamas for use as transshipment points for cocaine coming
in the U.S., and how drug-related corruption within the Haitian
military during recent years opened up another major transit point
in the Caribbean.

The judicial system in Colombia has been subjected to such vio-
lent assault it's almost impossible, to find a judge who will approve
imprisonment or extradition for major cartel figures. By late 1984,
the Medellin Cartel, in particular, consolidated an important rela-
tionship with General Manuel Antonio Noriega of Panama. That
relationship became one of the most significant developments for
the cartel. in a country, whose 'stability and security has long been,
considered of vital national interest to the . United iStates;

Intelligence reporting op: narcotics issues has been marginal and
woefully inadequate. Tlie ihtelligehce reports reviewed by the Sub-
committee failed to focus oh the scope of the drug crisis, the politi-
cal and economic power Of the cartels, or the threat the narcotics
trade posed to regional U.S. interests. It appears the. operations of
the cartels too often have been viewed as an adjunct to what has
been perceived as the more important issue of EasfrWest conflict in
the region.

Law enforcement officials and prosecutors during this period
have far too often focused only on individual cases and rarely con-
sidered the issue of narcotics trafficking in the broader context of
national security. However, there appears now to be a greater ap-

135

preciation within the law enforcement community on this dimen-
sion of the problem than there is within the foreign policy and na-
tional security apparatus of our government.

In sum, each agency with a responsibility for waging the war on
drugs has focused oh its own tasks and set its own priorities. This
not only has affected the ability of the federal government to wage
a coordinated strategy for .dealing with the problem, but also in the :
establishment of differing criteria by~ which individual agencies
view the cooperation of other countries in the drug effort.

Because of the implications of this failure .for American intelli-
gence as a whole, the Subcommittee urges the Select Committee on
Intelligence to review the process by which intelligence regarding
narcotics As brought to the attention of government officials. The
Select Committee on Intelligence also should^ determine if precon-
ceived definitions 'Of what constitutes ! a national security threat
prevented 1 the delivery of effective and timely intelligence' report-
ing aboutnareotics trafficking..

Federal Priorities

3. The threat, posed by the cartels should be given a major priority
in the U.S. bilateral agenda wiiKa number of countries, includ-
- ing Panama^ the Bahamas, Haiti, Colombia,' Peru, Bolivia and
' Paraguay. It should be among the most important issues with a
number y 'of other countries, including Mexico and Honduras.

The Subcommittee hearings demonstrated that in some bilateral
relationships, such as .the case of the Bahamas, policy priorities of
the United States, including law enforcement, were neither . ; clearly
defined nor regularly reviewed;" In Other relationships/ Such as the
case of Paha&a^;drug enforcement was considered but viewed as
less important than other foreign policy objectives.

The mehiners Of the Subcommittee believe that narcotics-related
issues shouid be given a high priority within the State Department.
U.S. ambassadors should receive clear instructions on the impor-
tance of narcotics-related issues in the countries to which they are
assigned. The Ambassadors should, in turn, regularly report to the
State Department on. the host government's responsiveness, or lack
thereof, in dealing with this problem. The Department should
signal clearly that our government places the highest priority on
diminishing significantly the effectiveness and power of the cartels.

While joint eradication efforts, such as those being undertaken in
Bolivia arid Peru, are positive signs of the willingness of other gov-
ernments to assist us in the war on. drugs, these efforts can only
promote marginal results. Eradication is essentially a war on small
farmers struggling to meet the basic needs of their families. Extra-
dition of major drug leaders and cooperation in diminishing the ca-
pability to -launder money will have a much more significant
impact in curtailing the power of the cartels.

136

4- In order to convey to other countries the seriousness with which
the United States regards the drug issue,, the President should
convene a summit meeting of Latin American leaders to ratify a
coordinated strategy for dealing with narcotics trafficking,
money laundering and related economic problems,.

A summit meeting of the United States and our Latin neighbors
would signal that the United States' considers curtailing interna^
tional. narcotics trafficking to. be of vital national and hemispheric
interest. ' ■■ f .

Such a meeting also should be a forum for the discussion of eco-
nomic issues which must be addressed as an essential component of
any solution to putting the cartels out of business; U.S. economic
assistance to the region is dwarfed by the amount of money the
drug cartels can bring to bear: in influencing the region's politics
and economies, The Unite,d States, must accept, this reality and
begin to. assist creatively in developing long-term economic solu-
tions' for Latin America. A meaningful debt relief program, for
many Latin countries is an obvious first step.

Covert Activity Issues

5. The war in Central. America contributed to weakening an: already

inadequate law enforcement-capability which was exploited
easily by a variety of mercenaries, pilots and cartel members in-
volved mJrug smuggling. In several cases, drug smugglers were
hired by Contra organizations to move Contra supplies. In addi-
tion, individual contras accepted weapons, money and equip-
ment ■ fr -dm drug smugglers ' ' ■ ■ -

The Subcommittee did not find evidence that the. Contra leader-
ship participated directly in narcotics smuggling in support of their
war against the Sandinistas, although i?ie largest,.Contra organiza-
tion, the FDN, did move Contra fundis through & narcotics traffick-
ing enterprise and money laddering, operation; There was, /more-
over, substantial evidence of drug smuggling through the war zones
on the part of individual Contras, pilots, who flew supplies,, merce-
naries who worked for the Contras, and Contra supporters through-
out the region.

There is also evidence on the record : that U.S. officials mvqrvBd,
in assisting the Contras knew that drug smugglers were exploiting
the clandestine infrastructure established to support the war and
that Contras were receiving assistance derived from- drug traffick-
ing. Instead of reporting these individuals to' the appropriate law
enforcement agencies, it appears that some officials may have
torned'a blind eye to these activities. ' ~ ■; '

6. There are serious questions as to whether or not U.S.. officials in-

volved in Central America failed to address the drug issue for
fear of jeopardizing the war effort against Nicaragua

The Subcommittee received testimony from a number, of individ-
uals who asserted that the U.S. government failed to .address the
drug problem because to do so might have interfered with the war
in Nicaragua. Serious questions have- been raised as why our gov-
ernment waited so long to deal with the Noriega problem in

137

Panama. The Barry Seal sting operation directed at officials of the
Sandinista government in Managua was prematurely announced
publicly by U.S. government officials, shortly before a crucial Con-
gressional vote on Contra aid, thereby jeopardizing an ongoing
DEA investigation.

There are also serious allegations surrounding the case of, Gener-
al Bueso-Rosa, a former Honduran military officer involved in an
assasination plot funded by money from the sale of cocaine in the
U.S., against President Suazo Cordoba. A number of U.S. govern-
ment officials intervened in the case of Bueso-Rosa, who ultimately
received a light sentence in a minimum security facility for his role
in this episode.

The Subcommittee urges both the Senate^ Select Committee on
Intelligence and the Senate Judiciary Committees to investigate
these episodes to determine if they had a deleterious effect on the
war on drugs.

7. The Subcommittee testimony of Frank Camper raises questions as

to what various military, intelligence units knew about illegal
activities. The testimony also raises questions as to whether or
not military intelligence was involved in improper domestic op-
erations. The Senate Select Committee on Intelligence should
review the testimony and consider whether remedial legislation
may be necessary

Frank Camper testified that he had reported violations of the
Neutrality Act to U.S. military Intelligence agents. There is a ques-
tion as to whether or not these reports were forwarded to appropri-
ate law enforcement agencies. Camper also testified to a number of
unauthorized, operations which were developed at his "Recondo"
mercenary training camp in Dolomite Alabama. He maintained
these operations, were. reported.to military Intelligence, which al-
legedly did not interfere with their implementation.

The Subcommittee found it difficult to assess the Camper testi-
mony. Nevertheless, in light of the serious questions raised by his
statements, the Subcommittee believes the Senate Select Cojhmit-
tee on Intelligence should investigate how the Camper case was
handled and whether actions of Military Intelligence were appro-
priate. ,

Law Enforcement Issues C

8. A primary focus of the U.S. drug effort must be on the major nar-

cotics trafficking organizations located in foreign havens. Law
enforcement efforts concentrated on the pusher in the streets,
the distributor in the U.S., and interdiction at our border have
failed to stem the flow of drugs pouring into this country

In recent years, the public has witnessed announcements by fed^
eral, state and local authorities of record drug seizures and arrests
of major distribution organizations in the United States. Yet, more
cocaine than ever before is flooding our streets as evidenced by the
continued decline in the price per kilo and the frightening increase
in drug-related violence in the U.S. . -

The current strategy is failing to stem the narcotics tide" because
law enforcement authorities are focused on the least vulnerable

138

level of the cartels' operations: the pushers and the distributors.
When drug salesmen and distributors are arrested, they are re-
placed immediately without serious disruption to the overall oper-
ations of the cartels themselves.

Witnesses have compared stopping drugs at the border to futile
attempts at plugging a funnel at the wide end. In addition, many
law enforcement officials doubt whether the current . efforts to
deploy high tech equipment in interdiction efforts will produce
meaningful results. While the United. States must continue to de-
velop and implement a strategy for interdiction, the most signifi-
cant portion of the federal effort should focus on denying the drug
cartels comfortable foreign havens where they are protected by pri-
vate armies and corrupt government officials. "

Senate advise and consent to the ratification of a number of
mutual legal assistance treaties would not only send a strong
signal as to the seriousness with which the U.S. is waging the war
on drugs, it would also enable us to deal more effectively on extra-
dition and money-laundering, where the cartels are most vulnera-
ble. '

In addition, pursuant to the Omnibus Drug Act of 1986, the Con-
gress provided the Administration with a range of sanctions to
apply tb- foreign governments which harbor drug traffickers; export
narcotics or facilitate the laundering of drug money. However, the
Congress did not clearly draft language which creates standards by
which the Administration can measure the "full cooperation" of
other countries. The result has beeii that the Administration has
consistently argued against decertification for such countries as
Mexico and the Bahamas. ^

While sanctions pursuant to the certification process will not 5 ' end
foreign official corruption, they would send a strong signal of TJ.S.
concern and seriousness. Members of the Subcommittee urge .'the
Foreign Relations Committee to again review the certification proc-
ess and to work with the Executive branch to. develop clearer
standards and more coherent definition of "full cooperation."

9. The President should deny Customs preclearanee for any country
identified as a narcotics source or transit country by the- U.S.
Department of State in its annual International Narcotics' Con-
trol Strategy Report which does not "fully cooperate" with %he
U.S. in anti-drug efforts

In the Bahamas, Canada, and Bermuda, the United States pro-
vides "pre-clearance" to foreign visitors; In addition, a number of
Caribbean nations are currently asking the U.S. to be considered
for pre-clearance. Under pre-clearance, persons entering the
United States are checked by. Customs in the foreign country,
rather than when they land in the United States. i

Some foreign nations, especially in Latin America and the Carib-
bean, prefer pre-clearance because it facilitates tourism and the
movement of people to and from the United States generally. The
Immigration and Naturalization Service also prefers preclearanee,
principally because it allows INS to exclude persons without a
valid right of entry before they arrive in the United States.

By contrast, the Customs Service has expressed concerns about
pre-clearance, because if any contraband is found it remains in the

1'39

foreign country and the person who is carrying it' is handled bv its
>w enforcement system rather than that of the UnltedStltes To?
example, the Subpommilitee received testimony that dingVfeSd £
the Bahamaj by Customs officials of that couiry werTllier sold fo

t&h^W^^" A ?°«r> "toe Subcoinmittee beSevS
that the overall U.S. policy of pre-clearance needs to be re-evaluat-
ed in major drug-transit countries with a substantial record of of£
23f ? r f rUl ? t10 ? ° + r a law enforcement system that has proven inad-
equate to combat narcotics traffickmg m tiie^nited. States. .
in^pRfl!? should consider ending Customs pre-clearance
ZrS% , tffi / or ce that government -to reconsider its ap-

proach and,attitude toward* narcotics trafficking. . i

10. The existing distrust and competition between law enforcement
agencies working on the drug problem and agencies working in

■. the national security arena must be resolved. Ways must be
tound to make 'it possible for law enforcement agencies io have
access to. national security intelligence information

■ In testimony before the Subcommittee, it was . apparent that
.members ofbomtbe jaw. enforcement and the SfangSS^
m Sf s reg i*™ each'other with suspicion,' if not outright distrust ^
-ips wemgence community^, /legitimately concerned that the
mformatipn it. provides to law" enforcement agencies, particularly
. sources ; and methods, could be eventually be disclosed in court pro-
ceedings. The primary concern of the inteUiggrice community is
therefore, .to protect sources and methods in gathering intelli-
gence which could bji critical to successful prosecutions
.j i", ^ ^uicumbeht upon the ; executive Branch of the government to
devise a mechanism whereby a useful, intelligence product can
assist law enforcement efforts in the war on drugs. A workable
..system for protecting classified information particularly as it re-
lates to sources and methods m . the . o^minal justice setting must be
developed.. Ttos issue should receive the serious attention of the
H® ct .Conimittee op. Intelligence and the Judiciary. Committee, as
well as by the new National Director of Drug Policy. ^

It U.S. law ^enforcement agencies should devote more attention to
counter-intelligence to prevent drug dealers and organizations
from penetrating their operations '

.The Subcommittee received extensive testimony . detailing the
m w }*$ th e cartels have penetrated U.S. law enforcement
operations at home and abroad. .Janitorial arid clerical workers
gS? C or access ',t6 files; low level officials have been

bribed tc^find out the disposition of ships and aircraft; law enforce-
ment radio frequencies have been monitored and police and federal
agents nave been placed under surveillance.

The ^.nafcoftcs trafficking organizations leave nothing to chance
Ihey have hired former law enforcement officials, including police
investigators, former federal, agents and former prosecutors who
now work as private detectives or private iawyers tor the cartels
Not only does this gave the cartels access to the identity of inform--
ants but also access to significant intelligence on the law enforce-
ment assets directed at their operations.

140

As with any threat to the security of the .United States, the w:ar
■against the drug cartels must rjely; heayly on the use of intelligence
and counter-intelligence. Intelligence gathering and investigative
efforts that aire compromised easily, places our law enforcement
agencies in a virtually unwinnable situation iti this war. ""

One •oT&e first tasks of the new -National Director of Drug policy
should be to take the steps necessary to remedy this situation. A
strong counter-intelligence capability must be developed as a
means of reversing the serious compromise of our law enforcement
efforts. .

12. Individuals who represent -themselves as working for the CIA or

other national security agencies of the United States Govern-
ment, and who in fact do not, should be promptly prosecuted to
the full extent of the law

Misrepresenting oneself as a U.S. government official is normally
not considered to be a major crime. However, during the course of
this investigation, the ; 'Subcommittee found that many individuals
who became involved in .gun rurniing, Neutrality Act violations
and even supporting narcotics trafficking did so because^they^were
told that their actions were either on^ the behalf of, or sanctioned
by, the .U.S. government. ■

Given the number of individuals involved in Central America
who. were by turns, engaged in activities which were legal, illegal,
official or unofficial, the proposition that some criminal behavior
was officially sanctioned is not surprising. It is evident that many
individuals took advantage particularly of the Contra effort for per-
sonal gain, while representing that they were either working di-
rectly for the U.S. government or undertaking' activities with' the
approval of officials in Washington. / '

The Subcommittee recommends that the Judiciary Committee
develop legislation to provide civil and criminal penalties relating"
to such misrepresentations. Prosecutions of individuals who so mis-
represent themselves could serve as a deterrent to others' who may
unwittingly become involved in illegal activities they think are offi-
cially sanctioned by our government.

13. The State Department should make a special effort to control
multiple entry visas from countries which are major transit
countries or which harbor drug traffickers

Witnesses told the Subcommittee that one of. the most effective
ways for controlling drug traffickers is to deny their access to mul-
tiple enti*y visas into the United States. There' is' not a legitimate
reason for the United States to allow aiiyone suspected j of working
with drug Organizations to enter and exit freely from the United
States. An. example cited in the testimony is Lionel Wooley, a Hai-
tian national who allegedly controls the Tonton Macoutes organiza-
tion in Miami and who is viewed as a major player in the Haitian
cocaine distribution network in southern Florida.

The State Department should, therefore, reexamine the issuance
of visas to foreign nationals with suspected connections to the drug
trade and, in cooperation with the Department of Justice, seek the
deportation of such mdividuals.

141

U ' ^Jf? 6 ™ 1 Avi ™™\ A dministration should undertake a major
■ *ffort to inspect the hundreds of substandard aircraft mw of
which are used for smuggling illegal narcotics, whTchJrT^af
ed throughout the United States. Those aircraft inhiX Jl \
meet FAA specifications should be JZ<^Tmttatl^° **

mfn rm f + u IiarC 1 0ticS P ? ots ^^"1 before the Subcommittee that
H/^f P lanes they used to fly their illegal cargoes into the
United States were substandard. The Subcommittee ftS^so m
spected numerous aircraft used by smueelers that™iM w
come close * meeting FAA standard IK pW ^4eS no? maT
tamed, their instrumentation was inoperable T aTd TthTrlqun-ed W
book i were not kept One plane, Vortex's famous N^TO^hed?
month after it was discussed in the hearings, killing the piloted

lvTn e ™t3i b !r ° f ^ Subco °imittee believe that if the FAA close-
terf^c 1 ^ S* 80 Planes each time they appear ed itt
^r^r P + i f % V £ au P? rt ' man y would be removed from service
permanently. Such an inspection program would make it moreen?

SoStry 6 t0 ™* legitimate air fields -d^ortst"

,15. The use of criminals in undercover operations should be limited
to intelligence-gathering for criminal investigation f (XhTwist
, our government risks allowing criminals to%on^u7promn%
from their illegal activities on a free-lance basis while ^in%
their government connection as a cover g

nilfijf r acce Pte d fact that for a drug trafficking informant to be
useful he must be involved in the narcotics busmess UnTercovS
affiSSnS^T easyaQd effective way to gather irSatlon
l,!t 5 j however, is that too many informant

°Perate independently of their handlers " ^

Whole law enforcement agencies are able, in large part to con
troKinformants, national security agencies haw J , J^ 1 ^ ?I
taskbecause of the need to i^a^S^^ 6 "

lne Subcommittee encountered deliberate efforts by criminals tn

SS^f i 6gal ar ? sh their assodation™£^

forcement and government undercover activity When an SIhvS

ual cnmmal supposedly working for the government £ a^es^d^
f^ th \ CIA k ^fense is often rated. ™ «u-
tfl™* ha fi b6C0me especially conimonplace in south

say asss s^^-^ssss^-

d^^ y in a ^ the United s *~irs

U ' ^L tr l m °h erS > mone ? ^underers, and their criminal enter-
pnses should not receive federal contracts, either byinadvZ-
tance or design. Such contracts can be used by drug trafficters

Zgc%!n^^

Subcommittee found that the State Department contracted
with four companies controlled by drug traffickers to providf Ibods
and service to the Contras in 1986. The State Department also S

142

tered [ into negotiations with one of these- companies on its own
behalf, after the company had been identified by the F.B.I. as the
headquarters of a major narcotics conspiracy. In each case; federal
law erifprcement agencies had information from more than one
source that the companies were significantly involved in narcotics
trafficking.

The payment of funds by the State Department to- drug .traffick-
ers, while they were under investigation by law enforcement or al-
ready indicted, is compelling evidence of "our government's' failure
to coordinate the war oft drugs.

The Subcommittee believes that the State Department should in-
stitute procedures to ensure that all- of its contracts are reviewed
by federal law enforcement agencies to insure that public funds are
not given to drug traffickers for State Department contracts in the
future.

Money Laundering Issues .

17. The Treasury Department should begin negotiations 6n gather-
ing deposit information. on large foreign' U.S. dollar.deposits as
authorized by the 1988 Omnibus Drug Bill .' \ ■ -' ,

The ability to launder large quantities of U.S. currency is. essen-
tial to the success of the major narcotics smuggling organizations.
The Subcommittee believes that tracking the drug money and ag-
gressive steps to prevent the movement of large amounts of cash
are the most effective' arid efficient ways to damage the cartels To
operate on a global scale, the Colombian cartels rely on banks will-
ing to accept large deposits of U.S. currency while maintaining the
anonymity of such transactions.

The .1988 Omnibjis Drug Bill calls for, negotiations with foreign
governments to require foreign banks, that accept US. dollars to
record depositor information. (Banks in the United States must not
only record such information., they must report it to the Treasury)
The Subcommittee recommends that the President instruct the
Secretary of the Treasury to pursue expeditiously and seriously
these negotiations.

18. The United States must take the lead in promoting internation-
al anti-money laundering regimes and regulations

Money laundering is a global problem of enormous dimensions.
However, few of our allies have laws whicl? make money launder-
ing a crime.

. Just as the United States has taken the lead in the development
of international organizations such as GATT to govern, trade, and
World Administrative Telephone and Telegraph Conference
(WATC) and Intelsat in telecommunications, the Subcommittee be-
lieves that United States must persist in pressing for international
money laundering control laws. Late last year, the United" States
became a signatory to the Vienna Convention, which eliminates
bank , secrecy as grounds for refusing requests for information
about financial transactions related to narcotics activity. The Con-
vention obligated parties to take measures making money launder-
ing a criminal . offense, and to enact laws for the identification,
tracing, seizing and forfeiture of proceeds of narcotics trafficking

143

and money laundering. .In addition, the U.S. supported the adop-
tion ot the Basle Committee's statement of principle "for the pre-
vention of the use of banking systems for the purpose of money
laundering. . J

The U.S. government , needs to follow up these initiatives with
support for detailed, international standards, to inhibit money laun-
dering and to facilitate the prosecution and extradition of narcotics
money launderers.

Personnel Issues

19. Narcotics law enforcement often takes a back seat to other diplo-

matic and national security priorities. This is due, in part, be-
cause the relevant agencies, have little regard for the people
work ing on the drug problem

Foreign service and career officers in the intelligence community
have told the Subcommittee that working on drug issues can be
detrimental to even the most promising of careers. In fact, young
Foreign Service Officers are told by their career advisors that
working on as few as two drug assignments can lead to exclusion
from consideration for promotion.

One reason that some government officials may not take the
drug issue as seriously as other issues, is that those with the skills
and ^qualifications are not rewarded over the course of a career
This attitude within the personnel system must change' in order to
attract motivated and competent people into the narcotics policy
area. Only then will the narcotics issue receive the attention it de-
serves within the various government agencies.

20. To encourage the most talented and' -experienced personnel to
remain on the job the Federal government must raise the sala-
ries of senior prosecutors and investigators and create special
senior positions .

The present federal pay scales make it almost impossible for the
government to keep its best senior prosecutors. Private practice op-
portunities offer three times the federal salary and benefits Pri-
vate sector woriang conditions, including clerical and research sup-
port, and benefits, are generally far better. Obviously, the federal
government cannot meet the private sector pay scale. The gap in
salaries, however, has' grown far too wide to permit top people from
seriously considering a government career. *

Similarly, law enforcement agenices encourage early retirement
for skilled investigators who do not move into senior management
jobs. For the most part, these investigators collect their pension
and then earn twice their salary working as private detectives
Consideration should be given to creating a non-management
career path to encourage the retention of especially competent in-
vestigators.

144

22. ' The Senate Judicary Committee should consider prohibiting

anyone who has held a policy position on the narcotics issue for
the U.S. government from working as a registered agent or lob-
byist on that issue for a foreign government

Foreign governments, such as the Bahamas, have sought to im-
prove their image in the United States and to prevent U.S. action
against them for their failure to address narcotics issues. A
number of foreign governments have hired former officials who
have had responsibility for drug issues in the U.S. legislative or ex-
ecutive branches. The Subcommittee' learned of situations where
these former officials represented their clients on drug issues ih
meetings with current U.S, government officials.

■If the drug issue is taken seriously as a national security matter,
the people who worked on the issue inside the American govern-
ment, and know our law enforcement strategies, should not be able
to market that knowledge to governments that are working direct-
ly with drug traffickers. . *

Neutrality Act

23. Private citizens should not be permitted to mount expeditions
from the United States aganist foreign governments without
formal US. government approval in advance and prompt notice
to law enforcement ■

As presently worded, a violation of the Neutrality Act is defined
as action taken against foreign governments "at peace with the
United States." Nevertheless, a variety; of private persons became
involved in supporting U.S. policy regarding the Contras, in some
cases while engaging in non-approved criminal activity. The result
was a situation in which At became increasingly difficult for.various
governmental entities, including law enforcement agencies and the
Congress, to determine what activities were authorized and what
were not. In criminal cases brought in South Florida since the
Iran/Contra affair, prosecutors and judges have had difficulty prov-
ing that free-lance activities by American citizens, including gun
runnings were in violation of the law.

The Subcommittee believes that private mercenary action mus£
be subject to effective prosecution. A mechanism needs to be estab-
lished to ensure that law enforcement and other relevant govern-
mental entities, including the Congress, can promptly determine iri
fact whether or not ostensibly "private" military expedition has
been authorized by the United States. r "

The Chairman of the Subcommittee intends to file legislation ad-
dressing a number of these concerns as a companion to this Report.

APPENDIX: NARCOTICS AND THE NORTH -NOTEBOOKS

Summary

Among the voluminous testimony and documents received, by the Iran/Cohtra
Committee was a significant amount of material relevant to matters under investi-
gation by the Subcommittee on Narcotics, Terrorism and International Operations

In early 1987, the Subcommittee Chairman, Senator John F. Kerry and Senator
Daniel K. Inouye, the chairman o f the Senate Select Committee on Secret Military
Assistance to Iran and the Nicaraguan Opposition, worked out an agreement under
which the staff assigned to the Subcommittee would receive the necessary special
security clearances to study all of the documents to which the Iran/Contra commit-
tees hadaecess.

In November and December 1987, the cleared Committee staff read thousands of
pages of Iran/Contra Committee material, including the "North notebooks," which
consisted of 2,848 pages of spiral-bound notes taken by North on a daily basis from
September, 1984 through November, 1986 covering his activities, telephone calls and
meetings while he was at the National Security Council. In reviewing these note-
books, the Committee staff found a "number of references to narcotics, terrorism and
related matters which appeared relevant and material to the Subcommittee's in-
quiry. However, .in many of these cases, material, in the Notebooks adjacent to the
narcotics references has been deleted from the material provided to the Committee

Upon reviewing the . matter with^staff. of the" Iran/Contra Committees, the Sub-
committee learned that neither the Iran/Contra Committees nor. the White House
had had access to uncensored North Notebooks. Instead, North or his attorney had
deleted portions of. the Notebooks which they considered to be outside the jurisdic-
tion of the Iran/Contra Committees. In all, 1,269 of the pages of the Notebooks were
censored to some extent by North or his attorneys prior to being delivered to the
Iran/Contra Committees, with 155 pages blacked out completely.

This occurred because North took the Notebooks, from the White House in No-
vember 1986 before his documents were impounded, and turned them over to his
lawyer, Brendon Sullivan. The' Notebooks were than subpoenaed by the Irah7C6ntra
Committees. North asserted his Fifth Amendment Constitutional right, and was
then given limited immunity by the Committees to compel his testimony. After
North was given immunity, his" attorneys still objected to furnishing the full Noter
books, contending that they were not relevant to the Committee's investigation and
North need only furnish portions which he and his attorneys determined were rele-
vant. _,

Because of the Iran/Contra Committee's very tight deadlines and the need to
have the Notebooks for at least a brief period prior to beginning the questioning of
North, the Committees agreed to allow North's lawyers to make deletions from the
Notebooks. North or his attorneys blacked out hundreds of Notebook pages and nu-
merous entries. Some of the censored entries were read by the Committee lawyers,
but most were not. Most important, the lawyers who read the diaries at that time
did not know names, dates and places which would later prove to be important, and
therefore were not in a position to determine the relevance of the material deleted

The Iran/Contra Committees' staff had only a few days to review the material ■>
before' North was questioned. The thousands of pages were furnished in often illegi-
ble copies and would have required weeks of analysis to make sense of under the
best of conditions.

Under a fundamental agreement over' classification which the Iran/Contra Com-
mittees made with the White House, the Notebooks were classified." at codeword
level and could only be released after a review by a White House declassification
team.

Following the review of the diary entries by cleared staff, Senator Kerry read sev-
eral hundred pages of the North Notebooks and wrote the White House on January
25, 1988 requesting the immediate .declassification of 543 pages containing refer-
ences to drugs and drug trafficking, North's probe of the investigation into North's
activities initiated by the Foreign Relations Committee in 1986, and related matters.

(145)

146

A White House declassification team declassified some of the requested materials.
Some of the materials were deemed "not relevant to the investigation, and others-
were not declassified because the White House team could not determine what they
meant without reading, portions not in their possession since they had Previously
been censored by North and his attorneys. The White House did not declassify 104
of the pages requested by the Committee staff, contending that all further declassifi-
cations would have to await the processing of materials necessary for Independent
Counsel Walsh in connection with the prosecution of Admiral John Poindexter;
North, Albert Hakim and Richard Secord for alleged criminal activity in connection
with their roles in the Iran/Contra affair. - c 4.-

When the Committee staff discussed- the problem, posed by the high classifications
given the materials within the Norfh,noteb6oks, White House Counsel A.B. Culva-
houee said the White House considered the Notebooks the property of the federal
government and subject to classification at the highest levels^ , .

The Subcommittee chairman, Senator Kerry, wrote the White House to state that
if the Notebooks were as sensitive as the White House contended, they should not
be allowed to remain in the possession of either North, whose clearances had been
terminated and who remained under indictment, or in the hands of his attorneys,
who cannot be cleared to the codeword level. While reiterating that it considered
the materials to be highly classified, the White House took no steps to secure .the
materials it contended remained federal property. ^

Committee Action

On April 26, 1988, the Committee voted 17-1 to approve a subpoena for the full
North Notebooks. The subpoena was served on Lt. Colonel North. On May 10, 1^,
North's attorney, Brendon V.'Sullivan, Jr., appeared before a Committee hearing
called for the purpose of receiving the subpoenaed materials. Sullivan provided no
Saterials and asserted North's Fifth Amendment privilege. He furthered the
Committee to rescind the subpoena on the grounds that its issuance would jeopard-
ize North's right te a fair trial, and that the material requested was beyond the ju-
risdiction of the Foreign Relations Committee. After receiving + legal ^dvice from the
Office of the Senate Legal Counsel, the Committee voted 10-8 to enforce the subpoe-
na on September 14, 1988, but was unable to secure the materials prior to the end of
the 100th Congress;

Case Study: The Drug-Related Entriks \

-Because of the extensive delections.in the Notebooks made first hy North and his
attorneys and secondly .by the White House, it is difficult to gauge from the non-
SSed materials of the Notebooks the full extent to which the Notebooks relate
to terrorism or narcotics trafficking, the areas qf the Subcomimtee s direct .jurisdic-
tion However, even in their highly incomplete state, the Notebooks do contain-nu-
Serous reference to drugs, terrorism, and to the attempts of the Committee tee}t >
investigate what North' was doing in connection with his secret support of the Con-

Among the entries in the North Notebooks which discernably concern narcotics or^

te MlTlM984 . . . contract mdicates that Gus^yo is mvoly^

June 26 1984. DEA— (followed by two blocks of text deleted by North) {Q0349)
June 27, 1984. Drug Case— DEA program on controlling cocaine— Efoer.cutott—

morrow Q0384)-DEA Miami— Pilot went talked to Vaughn-wanted A/C to go to
B^SiTto p/u paste-want A/C to p/u 1500 kuos-Bud to meet w/Group 030385)

Jury 12, 1984 Gen Gorman-'Include Drug Case (Q0400) Call from Johnstone-
(White House deletion) leak'on Drug (0402) . , .

jmv 17 1984 Call to Frank M-Bud Mullins Re-leak on DEA piece-Cariton
Turner (Q0418) Call from Johnstone-McMan\is, LA Times-says/NSC source claims
W H has pictures of Borge loading cocaine in Nic. (Q0416)

Juy^W Call from Clarridge:-AUredo Cesar ;Re Drogs-Borge/Owen leave
Hull alone (Deletions)/Los Brasiles Air Md-^Owen off Hull (Q0426) & ■

July 27 1984. Clarridge:— (Block . of White House deleted text follows)— Arturo
Cruz, Jr.-^Get Alfredo Cesar on Drugs (Q0450) „ , op/

July 31, 1984.-Finance: Libya-Cuba/Bloc Countries-Drugs . . . Pablo Escobar/
Frederic Vaughn (Q0460)

147

dtl^k Sl)^ qU6rieS 16 ™** H0Ufie deIe ^ in DEA operations in

O^Stf-f^ 8 io^ 0 So^^f e ^ ^ H — deletion^Tambs-
lol'do T BayofPigs-No^gf (QO9I2) H °^ e ^^not assoc. W/vl

M^^\^ tg W/A - C ~ of DlTpeS §S Orleans re Bust on
-it^ffiSK^ Tambs-DEA Auction A/C seized as drug run-
OPM^^^^^^^S or events which

ALLEGATION'S OF INTERFERENCE WITH THE COMMITTEE INVESTIGATION

The Kerry probe explored a variety of charges from a variety of sources that fh*
■fSffiS- 9D r ^ SUPP - y 0P erati0 ^ had engaged. in weapon! !muS n^cbtics

n ^ on S ^specific allegations of criminal activity focused on by Senator Kerry's
6 A e relating to alleged weapons shipments mvolVnie CivSiS

SS ^ 6 Group ^ad Cuban Americans in Miami active ^ptortoftS

the allegations that-had been^nade were false wruagiy suggested that

w tt? 0 ^ ^198^6, tr^e Subcommittee received sworn testimony from an Assist-
ant U.S. Attorney tM officials in the Justice Department sought Tto^derrW^ht
attempts by Senator Kerry to have hearings held on the aUefations ^hTIXom
JESS*? ^^ ha * c ^ential transcripts of Comrm^roSings iSd W
STffc! n^ 1 ^?^^!™*^ 11 auth ™tion, and pL& in thSleJof
the then US Attorney for the Southern District of Florida, Leon Kellner who wS
responsible for prosecuting the Miami Neutrality Act cases. who was

ST Felpman- who prosecuted the Neutrality Act cases in Miami relaf

fi yST**^ mvesti gation, testified under oath that on Nove^SlS 1987

he metmth Tom Marum, assistant head of the Internal Security DivSon of thi
fi?£ ?T^ ent ' !? d # the head °f the Division, John Marfc- FdSSL Isti!
mitB^^^^^^^}^ re P^ntatives ofXj^isS Depart
ment, DJiA, and FBI met in 1986 "to discuss how Senator Kerry's efforts
Lugar to hold hearings on the case could be underlined," (FeldmSMScS S $Z

^^yCommttee; Feldman Testimony, October 5, 1988 p 24) ousace > suopoe-
mentethe? ****** ^ Subcom *^ that as a result of Marum's state-

Became' concerned tecause I felt that perhaps the reason that my investi-

that you [the Senate Foreign Relations Committeel was looking at Tt
sense 1 that if th^ -Department didn't support? irlvi^S, tiael^
wouldn't support my investigation. I became concerned that my SSstiS
turn . . . could . . . have been quashed because had they gone forward with

148

it, it would , have lent credibility to the allegations that you wanted to ex-
plore. (Subcommittee Testimony of Feldman,. p. 29)

Feldman^testmed that following his meeting with Marum and Martin, he re-
n^f^ T 1 S? d 0 re "t wed documents given to him by Leon Kellner, the former
US Attorney for the Southern. District of Florida, Feldman testified that in review-
ing these files he found a transcript of an Executive Session of the Senate Foreign
Relations Committee, documents from the Committee investigation,- and memoranda
between Deputy Assistant Attorney General Kenneth Bergquist and Committee
staff on coordinating efforts "to basically show that what you [Kerry] were saying
wasn t necessarily correct." (Subcommittee Testimony of Feldman p 29) '

Feldmantestffied that he has a number of questions regardingjhe information he
found in the files provided him by US Attorney Kellner. "If tine Justice Depart
ment] opposed your, investigation, did Mr, Kellner know about.it, and if he did &
about it; did he let that factor influence his decision in delaying^oy investigation
, . .Was my memo revised for d^mformatipn purposes?. Was it revised sothat it

COl 51^ + ^.Wg** ^ y hGr - words ' * io the Grand Jury would lend
credibility to the fSenate] investigation, the opposite decision would take away from
it, and if you had a memo to that effect, it would detract from the allegations that
you were trying to encourage the Senate to explore." (Ibid., pp 45-46)

♦WM^i.* 681 ? 6 ? ^ Sf o ad gently learned that his memo, classified "sensi-
tive, had been leaked to the Senate Foreign Relations Committee. He testifiedthat
he had recently reviewed a June 26, 1986 memorandum prepared by Committee
staff m connection with reviewing the Kerry allegations. Upon reviewing that Com-
mittee memo, Feldman determined that it incorporated information- from Feldman's
memo to Kellner, mcludmg some material- which was "verbatim." (Jbid p 48)

Zeldman testified that his memorandum had a "sensitive?' classification on it and -
was prepared because Keener asked Feldman to produce it, not for the purpose of
going to a Grand Jury. (Ibid.; p. 51).

Feldman testified that he would not draw conclusions as ; to the meaning of the
documents he. found, but that the documents Kellner had given him, taken together
with Marum s statements, had aroused '/questions in my own mind again about whv
the memo was changed." (Ibid., pp. 57-58) y
Previously, . Feldman had testified before the Iran/Contra Committees that a
memorandum he wrote recommending -thaUhe eases he was investigating be taken
to a grand jury had been rewritten without his knowledge in late May 1986 Feld-
man testified that, the recommendation had been changed to suggest that a grand
i^^l. 5? m ??& a fishing expedition." -Before the Subcommittee, Feldman tea*
tilled that the statements made by Marum could create an inference that the deci-
sion not to move to a grand jury had been taken in order to slow down the Foreign
Relations Committee inquiry. B

In testimony under oath, Marum denied having told Feldman that there had been
an agreement to undermine the Committee's investigation into the allegations con-
cerning the Contras. Marum also denied that he had ever participated in discussions
to undermine or block Senator Kerry's attempts to hold Congressional hearings
Marum said it was true that the Justice Department and the other participants in
the meeting were opposed to such hearings taking place. (Subcommittee Deposition
of Thomas E. Marum, October 25, 1988, p. 56)

Marum testified that he was "totally unaware of anything that could even be con-
strued as an unethical attempt to mislead the Committee. Marum added that he
did recognize that the Department' saw no need to have hearings about a-matter
which we were handling. (Ibid., p. 75)

On November 7, 1988 Assistant Attorney General Mark 'Richard testified that
Feldman was wrong? about there being any meeting attended by Richard in which
there was any attempt to undermine Senator Kerry's attempts to have hearings
(Subcommittee Deposition of Richard, p. 37) Richard said he was aware of a meeting
which had taken place May 2, 1986 regarding the Kerry allegations which he^did
not attend, and a second meeting on October 15, 1986, which he did attend. Richard
testified that the latter meeting, attended by 20 to 25 people, went down the list of ■
outstanding items requested by the Committee to inventory and- respond-to them.
(Ibid., pp. 38-40) Richard recalled that the .DEA did not want to provide any of the
information the Committee had requested. (Ibid., p. 39) Richard emphasized that his
concern was to respond to the Committee's requests, .not to-block them (Ibid., pp. 99-

Richard recalled seeing the transcript of the Foreign Relations Committee Execu-
taveSession of June 26, 1986, but could not recall where or from whom he obtained
it. (Ibid., pp. 52)

"149

^^^S^^J^^Z^'^^ Subcommittee that
given as a m e ,by KeU^e? SStt^T he ha * been

transcript of the June 2 i 1986 Sed^etsin^f ^W?^ wading the

gatipns concerning drug trafficking ™™f ^fo™™**** which discussed alle-

al security reasons," kXS woSTth?nw 4, forward ^P 1 a ^ because of nation-
The SuLom^e ou£^d^^ZSiV' eTSOn °? office. (Ibid, p. 34)

Attorney's Office b^^S^^^^P^ 3 ?^ £° m &e M&ffiif U.&
. sistant Attorney Genera? ^S^^m^^^fST DepU *7 As "

sponse to Committee inquiries Tin thf ^I ST^ the J Pfe Department's re-
show that Bergquist aoughtS SteeL SSf S&^SSV* °li ^.TW.documents
in order to put to rest ^STSffilffi&S ^
cover-up. These documents includm? .l£ e P ar £° e i nt was engaged in a
ther show that the ^wS^^^S^S^J^^ 11 ^ ^
mittee's interest in the aUegt&oncerS SStaSfrif **** Com "

er with statements made by JuaSeDeDSSnt k^^T m emoranda, togeth-
tiie allegations, also dixa^T^SS^dsjI^lS v?*^ T*? 6 ^
sought to discredit both the aUegSons conceS^^n^ t D fP^ ei ? of Justice
Contras and the persons maldii|ffi e allegaSs f Belan ** relatin S to *■»

persons mating the charges ? concern ilwww ldent ^ed as the key

KenBeig^^aSteS^.iSTB^^^ 8, (Subcommittee ^position of

Bergquist testified that the Office of Legislati vp A flw™„F+i, t *• ^ -
was provided by July, 1986 with R M^^^^^^^^J 3 ^^
to take the Miami cases to a Grand h 0 ^eidman memo regarding whether
earlier "-when l^Sfi laSby »Sr2u£?S? 5f W "** *

fied that the .Feldman memo was tS'onlv n5w,PS ° SXt " m '' P ^ 9 l l eT S<i^st testi-
tigative files of the Miami mve?tigation ^ aSd&fe ^ P T?¥ from th * inves-
who in turn received it froSSSrSfi' pp Sf 82) * ^ Jdhh - Bolton
cgSK SSa^ rf -SSiS 4' W to interfere with

or any committee. O^^^^rS^ i^^T 1 ^ *****
"any deliberate attempt tomderniml alSate' »ob?^nt S^H^^ *

provided the SubSStte! ?5aH£&5 tLSSJ?^ ^ do ^nts
areas. However, the ma^ P Wen^i2^S^-J? 1 ^ m many essential
sions as to what happened Subcommittee to reach some condu-

it is clear that:

was pehding, at a ttoewhS °ftp T^H?^*!!? 11 ! ^ Miami iwesHgation
that no such matoS woSl °hf wdlded th?pi5^» WaS MdnE tte P ositfon
and ^thout the knowfedg. of KuSA tanolgX'SeTn

:.t^«?M^if-~

truth to the edlegations^ndJrfavSHon ifv fw? 1 "fH"™ was 110
ment officials mlde similS stoSS £ til 7jtt C™nn?tee. Justice Depart
potential witnesses and statE ihatthJ ,K ^' ^ credibility of

Conunittee had l^ta^&^thSS^fiftL"™ - *?^ by ^

150

4* The Justice Department did not provide information to the Committee that
would have corroborated the allegations rbemg investigated by the Committee,
although the" FBI possessed siieh information; In 'light \of the -information pos-
, .sessed by.the FBl, 4he-'infonhationiiiat^was provided' to the Committee by Jus-
- tifce Department- officials was misleading. Statements made to "the press by Jus-
Ltice Department officials 'regarding the allegations were also misleading: -"=-
The conflicting 'testimony under oath raises serious questions abbut-the actions of
Justice Department officials -which this Committee cannb£Wswer: *■-- -

-1, Did the USi Attorney's' Office'in Miami 'decide not to Convene a grand- jury
'• on allegations' of gunrurining and Neutrality Act violations jh May, 1986 be-
5" cause of concerns that the Convening df a grand jury: would increase , the proba-
bility' of an investigation into these allegations by- trie Foreign Relations Com-
'-■- mittee? .'■ - "■' "

.2. Did Justice' Department officials' seek to interfere with, the Committee in-
vestigation, because the investigation might damage the Administration's goal
"of Supporting the Contras? ,
Related questions, are raised by entries in the personal notebooks of Oliver North
which appear to concern the Committee and Kerry probes, \ v

The declassified North notebook entries inciude references to the Kerry and For-
eign Relations Committee investigations and investigators on April 18, 1986; Apri}
22, 1986; May 1, 1986; May IS, 1986; June 2, 1986; June 17, 1986; October 1986,
November 19, 1986; November 21, 19861' , - .

Trie entries show that North, was provided with iriformation regarding Senator
Kerry's attempts to have hearings in the spring and fall of 1986, at a."time when the
information was Committee confidential.. ' \ ■

' ^The North notebook entries raise the further question of whether North .and
others working with North took steps to interfere with the Committee investigation.

In August, North's courier, Robert Owen, was asked .by John Hull to transmit
copies of falsified affidavits charging th&Kerry 'staff with bribing witnesses to both
the US Attorney's Office in; Miami and to the Senate Ethics (^nimittee.- The, US
Attorney then provided a copy ,of these affidavits to the Justice Department in
Washington. Shortly thereafter, these false charges; against' Kerry staff appeared in
press accounts, while the Committee. investigation ,was pending.^

Taken, together, these .facts raise the question of whether North, Owen, and Jus-
tice Department officials may have sought to discredit the Kerry investigation be-
cause of concerns that it might ;harm the Administration's efforts to- support the
Contras, , .-

The Subcommittee views the' allegations — that high ranking officials, including, of-
ficials in the Justice Department, may have acted in concert to obstruct- the Com-
. mittee investigation— to be .quite serious. When high ranting officials, deliberately
provide false or rnisleading information to Congressional investigation, the result is
tha't the Congress cannot carry out its constitutionally mandated responsibilities,
and our system of government is put at risk. r

The following chronology details a number of events and facts relevant to any fur-
ther investigation of these matters.

Chronology

May 4, 1983. — Ramon Milian Rodriguez, a self-professed, money launderer for the
MedelUn cocaine cartel, is arrested by DEA agents while -attempting to leave Fort
Lauderdale, aboard his personal jet with $5 miRioh .in.hi^ ,personal jet. Prior to his
arrest oh money laundering charges, for which he,was later convicted; he told feder-
al agents, that "the money was all the proceeds of narcotics transactions," and he
provided a list , of narcotics traffickers, whose taxes he prepared. Among those he
named were "Luis Rodriguez:" Records of Milian Rodriguez seized by federal agents
when he was arrested- May 6, 1983. included numerous references to the services he
provided "Luis Rodriguez," .and showed Luis Rodriguez' address to be 535 SW 98th
Place in Miami, the corporate address for . "Ocean Hunter," a seafqod import busi-
ness. (Trial documents, XJ.S,^.. Rodriguez, SD Florida 1983) . j _

May 27, -1983.-— While mvestigating the bombing of the Continental Bank in
Miami, Miami police detectives. receive allegations regarding Contra operations in
Costa Rica being supported by narcotics funds involving a company called "Ocean
Hunter,'* which, is traced to Luis Rodriguez, a Miami based Cuban American, who
has been, named as a drug trafficker earlier that month by his indicted accountant,
Ramon Milian Rodriguez. The address for the company was 535 SW 98th Street, the
same address shown in the records seized by -the government in its prosecution of

151

Ramon Milian Rodriguez. (On September 26 3 1984, this material is approved to FBI
Intelligence SA George Kiszynski and recorde&in an FB1^302).

March 2, 1984 and April 13, -1984,— Luis Rodriguez' is interviewed by IRS agents
Regarding Ocean Hunter, drug trafficking and money laundering and takes the
Fifth Amendment on almost every, question. (Documents on file in U.S. v Rodri-
guez, ND of -Florida, 1988) ■

June 26, 1984.^North notebook entry reads; "Call from Owen— John Hull— pro-
tection . i i John now has "private army of 75-100''— Cubans involved in drug— up
to- 100 moire Cubans expected. (Redaction) (Iran/Contra Q344) -

July 20, 1984.— North notebook entry reads: "Call from Clarridge: Alfredo Cesar
re drugs— Borge— Owen leave Hull alone. (Iran/Contra 426)

July . 23, 1984-^Oliver North notebook entry reads: "Call from Rob Owen— pall
from John Hull . •. . Pastora "convinced that Hull has "sold out." Q0432.

September 1, 1984.t-Two Americans die in the downing of a helicopter by Nicara-
gua. The two Americans are members . of Civilian Military Assistance Group
(CMA ). The helicopter was equipped with rocket pods and an M/60 machine gun.
The attack is part of a Contra assault on a Nicaraguan base at Santa Clara Follow-
ing the downing, members of CMA meet with a representative of the US Embassy
in Honduras, who instructed them in a cover story," directing them to say they
were not involved in combat, but on a- humanitarian .mission, because the true story
was^ 'not in the interests of the United States " (FBI 302 of Thomas V. Posey, 8/6/
87) - - '

October 12, 1984.— The Boland Amendment is signed into law, prohibiting "direct
or indirect support by the United States for the Contras. v

October 25, 1984.,— FBI SA George Kiszynski interviews Rafael Torres Jimenez
who states that he has been working with Contra leader Eden Pastora in Costa Rica
to fight the Sandinistas, as part of a group of Miami Cubans including Frank Castro
and Rene Corbo, who established a military camp in Costa Rica. Jimenez states that
some of the Cuban Americans had obtained weapons and explosives in Florida for
foreign operations: (FBI 302 of 12/17/84) ;

-November 29, 1984. — FBI SA George Kisyznski interviews Joseph Marcos in con-
nection with the Continental Bank" bombing investigation; Marcos advises him that
a group of Cuban Americans have established a military capip in Naples, Florida
and that Mariel Boat Cubans ("Marielitos") and Contras were being trained in the
camp before going to'Costa Rica to receive additional military training and to par-
ticipate in inilitary operations against the Sandinistas. (FBI 302 of 12/17/84)

December 12j 1984.— Frank Camper, who operates a mercenary training school in
Dolomite, Alabama, reports to the FBI that there are approximately "one dozen
U.S. citizen volunteers and fifty or more FDN trainees training for deep penetration
raids into Nicarargua," and that the operation involves Posey and members of
CMA, along with a "Colonel Flacb:" (Camper Document, subpoenaed by Subcommit-
tee)

Mid-December 84.— Meeting at Adolpho Calero home in Miami to discuss South-
ern Front operations of Contras. The attendees discussed what CMA could do on the
Southernl Froht with Hull as the coordinator. Attendees: Adolpho Calero, John Hull,
Robert Owen, Phillipe Vidal Santiago "Morgan," Enrique' Bermudez, Joe Adams^
Tiradon," Jack Terrell "Flaco," Lanny Duyck "Doc Zorro," Aristide Sanchez,
Donald Lacey, and Frank Chanes, (Subcommittee Depositions-of Terrell and Adams
Iran/Contra Deposition of Robert Owen, Appendix B; Vol: 20, pp. 799-800)

January 14, 1985.— North notebook entry: "Rob Owenf John Hull— no drug con-
nection—believes." (Iran/Cohtra, North Notebook Q0977)

January 24, 1985.-r-Rene Corvo tells FBI SA George Kiszynski that he is the mili-
'tary leader of a Contra training camp in Naples, Florida, working with Francisco
Chanes and Moises Nunez, together with "John Hall" [sic] who is assisting the Con-
tras from his Costa Rican ranch. (FBI -302, March 1, 1985)

February 15, 1985.— Frank Castro, a Cuban American who had previously been
convicted on marijuana importation charges in connection with a spinoff of the
DEA Grouper Case," tells FBI SA George Kiszynski that he is backing actions
against Communist targets outside of the United States and has been providing
Rene Corvo's military camp with military gear. Castro! tells Kiszynski about the in-
volvement in the Contra war of. "John Hall" [sic] who has large holdings of farm
lands in Costa Rica. (FBI 302 3/8/85) -

February, 1985.— Life Magazine identifies Bruce Jones as "a CIA man in Nicara-
gua," and describes bis 55-acre citrus farm in the jungles of northern Costa Rica, 30
miles from the Nicaraguan- border, a farm which isractually controlled bv John
Hull. (February 1985 LIFE) 1

152

liebruary, 1985.-CMA leader Tom Posey; is arrested in *^ «JS»g£'
charges where he meets Jesus Garcia, a booking office^ who offers to wofkmth
PoSf T^rovtfing assistance to the Contras. (Iran/Contra Deposition of Feldman,

A i Sru^' 1985 -At'rWrd Johnson's Motor Lodge in Miami, group of American
mSrenSs assoriated^th CMA are introduced to Rene Corbo and others involved
S SiwSSA^an operation in support of Contras -and discuss Co »**£?^™:
tivtoes in Central America. Mercenary Steven Carr ^agrees ^go to. to
help train Contras. (See Iran/Contra Deposition of Owen, Appendix B, Vol. 20, p_
799? Kerry staff interview of 'Stephen Carr in La Reforma Prison, San Jose, Costa

Ri Ste Str4rV-Earl y March, ' 1985.^0wen goes to Costa Rica at the request .of .
CoW NoXS Siate meeting of Contra groups He byFgmk
Gomez of International Business Communications: and Jonata Miller of the NSC.
Oran/Contra Deposition of Owen, Appendix B, Vol. -20, pp. 658-660) _

March 3 1985.-Soldier-of-fortuhe Steve Carr,and Cuban named Papito load
vS of urf.rro?boote and medicine aboard cargo plane atFort .^de^e-Hol-
van vi .> - 5v anc i sco <l p a pito" Hernandez, 6/17/ab and b/^4/ebj

boxof 30 G-3 automatic rifles. and abos of M-16s two 60mm mortars ^80-4^0
ra?rtar rounS, and a<50 caliber machine gun with 250 rounds of waamjtum, Carr,
C^SSw? and Carr aboard flight from Ft. Lauderdale/Hollywood drport
Flight i on P American. Flyers, a Ft Lauderdale air ^
Daniel Vazauesz HI, twice convicted of running guns to Cuba in the 1950s and
1960? HaSKS rnto Ilopango, military airfield in El Salvador. No customs checks.
Mate^Toffloaded. Include! 14' long 20 mm cannon AK-47 automatic ^ |to

r2£Z>?otoSl by l&U.S lwCorbo,Tal, SB Florida 1988 mcluding false Cu*
SmTdetotion mamfcBt, and recbrds of Florida Aircraft Leasm^

March 9198?-HuU pays to fly British mercenary Peter Ghbbery from Miami to
Coste fUcI rn support of 'Contra military activities. (Iran/Contra Deposition* of

^^&^Sol^^^htZ^ friend at the National. Security^Council
who^ul mm ££on& hlKi-bank account for him. Hull ^o te^ Carr a^d
GKr? around March 17 or 18th that. he had gotten a caU from-his. friend _a the
NSC Twho^dhim the FBI was investigating him for dnig ; £afficking> ^f«^
frilnH "fnr^nd sakes tell me -if you are so we can do something .... (Kerry Staff
SSview of Peter Gm.be™,' March 9,. 1986 and May 26 1986; Owen confirms
So 000 a month clmo fron Contra funds maintained by AdoHa Calero . Irarr/Contra
ffi^-Hnn^SnfflSx- B' Vol- 20, pp. 650.-651), Owen later testifiesthat a ^wch
aS^S^^^S&^^&^Oweii-hB had talked with the FBI and that '*£he
FBI* ^tchinrSuW fo? drug trafficking" (Iran/Contra Deposition of Owen, Ap-

^^.UmaU plane lands at Hull's .airstrip with an^E pilot,
In^aS are clothes, boxes, US Army manuals written in Spanish from Special
Forc^sdSol PUot was to bring suppEes north, but had landed on wrong fielf
SSFo™ Davies and GHbberFand ARDE pilot fly in the ARDE plane and Hulls
S^e^S^ strip, 50 miles away, and find .the plane. In th£P&ne is a 5 eg.
taJroi^bS&. of uniforms another materials. Arms;ar e, ften . sent te . nght mr-
S^an/Contra Deposition of Robert Owen, Appends . B, Vol. 20, pp. 664-665, see
ako Kerr? staff interview of Peter Glibbery, March 9, 1986 and may$6, 1986)

a ™$ 92 ie«*— Carr Glibberv and three other mercenaries are arrested m Costa
Eiclfn^opa^SoM by^ohn Hull <UMu« 9 raid « Nicaragua.
^TiWContra Deposition of Currier, Appendix B, Vol. 8, pp. 199 7 200) ^ -

AnS 1985 -The State Department conforms that two &.S. citizens have been
^Sd oV Costa Rican police Diane DHlard, State Department Spokesman m
office of insula? Affairs, states "all we know is that they are m jail and tfcatthe
omce 01 ^^^frrrr embassv is visiting them." Dillard cites press reports that
ISSSwS S'— S^uarty, Ld suggests ^hat HuB Wens to have
Wnfarm in the wrong heighborhood.' , (Inter Press Service^ April 26, 1985} _
1985 ™flpho Calero metets with Robert Owen to conclude purchase of
and SomSon for Contras, after telephone calls involving General Sing-
ESTX TwlsTovSg the weapons, and Lt Col. North, who was c^rseemg. the
Dur^ase SfcontrS : Testimony, of Robert Chven, May 14, 1987, pp. 343-346)
P ^ffi 19X-FoU6wing a July 7, 1585 press conference at La Reforma Prison in
Co^Rica; The New^k TinL and Miami Herald report- fhat two mercenaries

153'' ^

claim to have flown out of Ft. Lauderdale, March 6. Oh flight loaded with Weapons
for the Contras. The mercenaries, Steven Carr and Peter Glibbery, name John Hull
™ ^kef naison to -the Contras in Costa Rica. (July 8, 1985 New York Times; July
21,1985 Miami Herald) J
. July 2&, 1985.-FBI Agent Currier initiates . Neutrality Act investigation on basis
of reading July 21,1985 article m Miami. Herald quoting Carr and Glibber/s state-
ments about supporting the Contras from South Florida. (Iran/Contra Deposition of
Cumer, Appendix B, Vol. 8, pp. 198-199) . < -

-August 8; 1985.— New York Times reports on front page that contras are gettine
advice from White House on operations and that NSC aides were helping contras
raise money from private sources. It describes the contras as "the aceouht", of an
unnamed "military officer" in the NSC. (New YorkTimes)

^eust 9, 1985 --Following r meeting with- Robert Owen, North notebook entrv
reads: D06 which is bemg used for erun out of New Orleans is probably being used
for drug runs rnto U.S. (North Doc #36336) -

August 10 1985.— North notebook entry reads: "Southern Front . . . John Hull to
arrange for [redacted] training.'^ (Iran/Contra Appendix A, p. 374) Later entry for
S^-^ r e e »^ : ^ W " A - C --Name of DEA person in New Orleans ire bust on
Mano DOS." (Iran/Contra Appendix A p. 376) ' ~

August 15, 1985.— Garcia is arrested on machine gun charges He tells ATF ar-
resting officers that MAC-10 and silencer werelntended to be shipped to Honduras
tor the Nicaraguan contras and he was part of a paramilitary group that was goine
to attack the Embassy in Managua, -Nicaragua, He also states that he was a close
friend of Tom Posey, the head of CMA, and that Garcia had given firearms and am-
munition to Posey in the past to be shipped to the contras and Americans in Cen-
(Stotoment of Dennis Hamburger; ATF arresting officer, August 27,
19H5, in U.S. v.; Garcia, SD Florida, 1985). -

August 25, 1985.— the New York Times reports that John Hull is reportedly heto-
mg Contras and is acting as the FDN contact in Costa Rica. (August 25, 1986 New
York rimes, New Anti-Sandinista Unit Forming on South Border," p. 3)
. October 11, 1985.^Financial Times of London publishes interviews with Can- and
Glibbery m which they claim that Hull said he was receiving $10,000 per month
from the National Security Council. (Financial Times, "Soldiers Fail to Find Then-
Fortune, p. 5) - ^ . ~ .

December 20, 1985.— AP states "Reports Link Nicaraguan Rebels to Cocaine Traf-
ficking, describing case of Sebastian Gonzalez and alleged involvement of Eden
Pastora in using drug money to buy/supplies. (AP, Nexis)

January 7, 1986,-The MiamJ U.S. Attorney's Office begins to investigate the
^ as ff i ^ r Sr*"" 019 was mterv *ewed hy FBI at MCC in Miami, alleging a plot hatched
m l9S5 in Miami to assassinate U.S. Ambassador Tambs and to pick up a reward
from Colombia Medellin cartel member Jorge "Ochoa. In 'the interview Garcia
placed Tom Posey of Civilian Military Assistance (CMA), Stephen Carr, Peter Glib-
bery, Sam Hall and Bruce Jones in the plot. The FBI "had very very good informa-
tion of what actually had occurred regarding gun running [already]. The truth re-
garding the flight and other flights, extremely good information. We were aware of
Miami Cubans , involved in gun running, weapons, ammunition, several occasions
trom Miami- to Central America, the 1 people involved, where the guns had been
stor^edi ho^the^money was raised." Oran/Contra, Deposition of Currier, Appendix

^January 9^986.— The State Department begins making payments from the U S
.rreasury to Frigonficos de. Puntarehas, a money-laundering and drug smuggling op-
eration controlled by Cuban Americans working on Contra supply efforts with Rehe
Corbo on behalf of the Contras, from funds appropriated for' humanitarian assist-
ance by,±he Congress. The payments- continue in installments to April 20 1986 to-
talling $261,932. (GAO Analysis of NHAO Payments; FBI Memorandum of Inter-

^o^^^^k 1 ^ R °^ gUez ', AprU 3 ' 1987 ^ 03x105 Soto > from U.S. v. Rodriguez-
FBI 302's of George Kiszynski produced in US. v. Corbo.)

January 14, 1986.— Garcia is polygraphed. The first FBI agent reviewing the poly-
graph determmes that Garcia had passed. A second review in Washington concludes
that Garcia s answers were inconclusive on the existence of plot, and false on Tom
Posey's mvolyement. (Iran/Contra Deposition^ Mark Richard pp. 78-79, Currier
Vol. o, pp. 205-206) , s *

January 22, 1986^-AUSA Jeffrey Feldman's notes on Garcia allegations include^
Rene Corbo and John Hull, ffeldman, 20) Between that date and mid-March the-
FBI continued its investigation; The FBI agents involved, Kevin Currier and George
Kiszynski, discussed impaneling a grand jury as early as February. The name of

154

Oliver North comes up in FBI Miami Gorbo/Garcia investigation in this -period.
(Iran/Contra Deposition of Currier, Appendix B Vol. 8, pp. 211^212) .

February 7, 1986.— Senator Kerry learns of Garcia's allegations regarding private
assistance efforts on behalf of the Contras involving alleged weapons- and,narcotics
violations. "Senator Kerry asks his staff to meet- with Jeeus Garcia at Metropolitan.
Correctional Center in Miami. Garcia suggests Senate staff, interview Carr and Glib-
bery to confirm his allegations; , „ i' ^- m* i

March 5 1986 — GAO's Frank Conahan testifies before Subcommittee on Western
Hemisphere Affairs of House that $7.1 million of humanitarian aid distributed- by
NHAO contains no audit trail showing- payments frombrokers' accounts to suppli-
ers and only>partial documentation of shipments from thesuppliers to the resist-
ance forces. Records subpoenaed by House Subcommittee reveal payments by the
State Department to Frigorificos de Punterenas, with the signatories on the bank
account being Luis Rodriguez, Frank Chanes, and Moises JMunez; Chanes and Nunez
have previously been cited in FBI investigative reports for then- mvolyement with
the Contras in Central America; Chanes has been named as a narcotics trafficker to
the FBI; and Luis Rodriguez has been named as a narcotics trafficker and previous-
ly taken the Fifth Amendment in response to questions by the IRS. (NHAO docu-
ments and GAO analysis of bank records subpoenaed by House Subcommittee; h Si
302 of George Kiszynski, September 24, 1984; IRS interview on file in U.S. ,% Rodri-
guez, ND Florida (1988)

March 8 1986.— Senator Kerry's staff interview Carr and Glibbery at La Reforma
prison in Costa Rica. At that meeting, Carr "and Glibbery repeat allegations they
had made in the past to the press regarding the presence of explosives and mines on
Hull farm, and the connections between North's, courier Robert Owen, Hull, and. the
Cuban Americans providing support, to the Contras. ■ - . ■ c .

March 13, 1986.— Assistant Director of FBI Oliver B. "Buck" Revell sent an
urgent inquiry to FBI Miami about Costa Rican and Miami Neutrality case, asking
for a summary of the Corbo investigation ."expeditiously.", A 38 page XHM or
letter head memorandum is sentin March, to Revell from Currier and Kiszynski m
response to RevelTs request: It mentions Owen's name, as well as Hull ,and Sam
Hull as among the targets of the .grand juryithat. Currier and K^zynski are then
anticipatingv tlran/Contra Deposition of Currier, Appendix B, Vol. 8 p. 229). In addi-
tion to Revell, the original LHM was sent to US Attorney's Office in Miami, to Cus-
toms in Miami and to HQ. (Ibid., p, ; 230). „. rrci " "

March 14 1986.— Assistant AG Mark Richard calls Miami US Attorney Kellner to
ask him about a case involving allegations of an alleged plot to assassinate the Am-
bassador to Costa Rica and a variety of other allegations, including Wowing up. em-
bassies. (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14 p. 1031). . .

FBI Agent Kevin Currier and Miami public defender John Mattes; Garcia s
lawyer meet with Feldmau. Feldman brings Custom's, declaration forms on March,6
fliirht and hotel bills confirming Garcia's claim that Carr and Thompson were at
Howard Johnson's hotel in Miami. KeUner L appeared, at mee^askisg, do^s any-
body know anything about these mercenaries in Costa Rica? It was, Feldman s im-
pression that he asked this as a consequence of a purine call from Justice. As a
result of Kellner's interest, Feldman decides the case was more important than he
previously thought Kellner and Feldman agree that Feldman wiU:go J to .Costa Rica
to check the case out. (Iran/Contra Deposition of Feldman, Appendix B* Vol. 10, p_.
55)'Feldman tells Mattes that he hopes to impanel a grand jury on case, £ipid., p.

117) .'.!■•<.

According to FBI Agent Currier, Kellner. states he liad been on the phone with
high ranking officials in the U.S. Department of Justice regarding Garcia and the
mercenaries -incarcerated in La Reforma 'prison in Costa Rica. (Iran/Contra Deposi-
tion of 'Currier, Appendix B, Vol. 8 p. 213).

March 17 1986.— Kellner is-called by Mark Richard, of Justice, to request a con-
tinuance in Garcia's sentencing hearing. According to Feldman, "between' March 14
and 17 it was a lot of momentum building up." Feldman files for a continuance at
Justice's request. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. bO;
Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, p. 1034). -

March 18 1986 — The San Francisco Examiner reports that one or two contras
may have dealt cocaine." The article cites a -State Department official, William
Walker as acknowledging that a few contras might have been mvolved who were
associated with the ARDE group, hut could provide no details. (Examiner p. A-12).

March 18 1986.— Feldman's notes refer to Daniel Vazquez, Jaime Ortega, and
other possible targets of neutrality probe, include Rene Corbo, Frank Castro, Fran-
cisco Chines (sic) [Chanes], Philepe (sic) [Felipe] Vidall, Juan Perez Franco, Steven
Carr Peter Glibbery. According to Feldman, George Kiszynski discovers that Corbo

155

and other Cubans might not only have been, involved in bombing the Continental
Bank m Miami but also in training people at paramilitary camps and sending them
down to Costa Rica. (Iran/Contra Deposition of Feldman, Appendix B Vol 10 p
63).- > • > v-

March 18 1986.— Feldman draws up list of witnesses which includes the pilot of
the March 6 weapons flight plane, Daniel Vasquez, Martha Honey, Tony Avirean
John Mattes, Jesus Garcia, Jack Terrell and Alan Saum, (Iran/Contra Deposition of
Feldman, Appendix B, Vol. 10, p. 64). '

March 20, 1986.— Deputy Attorney General Lowell Jenson sends letter from FBI
Assistant Director Oliver "Buck" Revell regarding "NEUTRALITY MATTERS" in-
vestigations. Content, of entire memo redacted before sent to Iran/Contra commit-
tee. (See Iran Contra Exhibit EM-73).

t IV f a ^£ h 2 Vi * 986 . - ^j!™ 311 makes note to make travel arrangements to meet with
Jack Terrell m New Orleans. Terrell has previously given a statement to an FBI
othcer m New Orleans. ;(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10 p
66). *

a j^^tvt^\ ^t^'* 1986.^— ^Assistant Attorney General Stephen S. Trott writes Assistant
AG Mark Richard to "Please get on top of this — DLJ [Lowell Jensen] is giving a
heads up to the NSC. He would like us to watch over it.^Call Kellner, find out what
£s is up, and advise him that decisions should be run by you." (Iran Contra Exhibit
EM-73) (Iran/Contra Deposition of Richard, Appendix B, Vol. 23 p. 55) Jenson testi-
fies that he then briefed Admiral Poindexter in the NSC about the allegations made
by Jesus Garcia, including Neutrality Act violations and alleged Contra gunrun-
ning. It was the only , time Jenson ever briefed Poindexter on a case. (Iran/Contra
Deposition of jenson,. Appendix B, Vol. 14, pp. 582-593) Richards says this memo
was justified because NSC should be alerted about a plot to attack U S facilities
and it s natural that somebody in this context better tell the NSC assuming
you give any credence to the allegations." (Ibid., 56) Richards says that the memo
meant that decisions on the case to prosecute or not prosecute, the ultimate decision
to j indict or not indict, should be run by him. (Ibid. 63-63) Richards says he has no
idea why the case was being treated so seriously, that one would have to ask Trott

%a^^'J^' 645 Ricnards has written on undated note from this period "Hull—
CIA . (Ibid. 71).

After March 24, 1986.— North is provided an FBI investigative report on the
Miamiinvestigation written by Kiszynski, according % Justice Department spokes-
man. The report is later found in North's files at the NSC after the Iran/Contra
affair is uncovered. The exact date North received the document is unspecified (See
AP, North Got FBI Report on Contra-Supply Probe, Officials Say," April 14 1987)
March 25, 1986:— Feldman and FBI SA Kiszynski meet with disaffected contra
mercenary Jack -Terrell m New Orleans, who describes paramilitary activities of
CMA, Terrell, Posey. Terrell is questioned for 14, hours. Feldman said Owen was
OA. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 69: Deposition of
Cumer, Vol. 8, p. 217).

March 26, 1986.^Assistant Attorney General Mark Richards notes that he "spoke
to Kellner, AUSA not back from N.O. File, contra folder." According to Richard
Kellner said story was something being manipulated by a couple of reporters" and
by Garcia to mitigate his sentence, and mvolved "CIA involvement in this transac-
tion, government irregularities, and what have you." (Iran/Contra Deposition of
Richard, Appendix B, Vol. 23, p. 66)

March 27, 1986.— Feldman meets with Kellner, discusses Terrell interview and
confusion about thousands of allegations" flying around, including assassination
,plot on Ambassador, mercenaries in Honduras, and common threats were people
who were attempting to assist the contras. According to Feldman, Keilher and Feld-
man were both very confused about allegations. (Iran/Contra Deposition of Feld-
man, Appendix B; Vol. 10, p. 70) f *

March 28, 1986.— Feldman meets with Kellner for six hours. Kellner has ho recol-
lection of substance of meeting. Feldman has no. recollection of substance of meet
ing. It ends with Kellner advising him to go to Costa Rica. Feldman cannot recall
whether. he discussed Oliver .North or Feldman with Kellner at meeting (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 71; Iran/Contra Deposition of
Kellner, Appendix B, Vol. 14, p. 10,40)

Prior -to March 30, 1986.— Feldman has,' developed chart showing Oliver North
National Security. Council, ^Staff Intelligence Mviser, CIA; Rob Owens State De^
partment, something AID, John Hull. From Hull are lines to Bruce Jones Jim
genby.-.Then a line from Hull to" FDN. and from FDN to Cuban (sic) allegience
: [Legion] [Rene Corbo's organization]. Feldman states that his "earliest notes showed

156

a reference to North." (Iran/Cbntra Deposition of Feldmah, Appendix B, Vol. lO^pp.
72"-73) - '

March'31, 1986.— Feldman, Currier and Kiszynski flyto Costa Rica and go to U.S.
.Embassy, where they are advised by Assistant Security office Jim .Nagel that Am-
bassador Tambs wishes to speak to thein. Feldman "pulled out my little chart with
Oliver North, Rob Owen and John Hull. The Ambassador turned white ; . . The
only ting he said when I pulled out the chart was 'Get ['Castillo'] in here.' (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 79; Deposition- of Currier,
Vol. 8, p. 222) ,

March 31, 1986.— "Thomas Castillo' is introduced to Feldman as CIA station chief
in Costa Rica, with Tambs present. 'Castillo' tells Feldman that Hull was classified
U.S. equipment prior to 1984, and used by U.S. military to deliver supplies to' „con-
tras prior to the Boland Amendment. (Iran Contra Deposition of Feldman, Appendix
B, Vol. 10, pp. 80-81) 'Castillo' tells Feldman Hull hasn't been involved in any mili-
tary capacity for USG or contras since March of 1984, but that Corbo is a renegade
without any ties and has 50 people operating in Costa Rica out of Hull's ranch. Cas-
tillo' requests that Feldman or Justice contact him if Justice is to "take action
against Hull. Acccuses Honey and Avirgan of being tied into "September .murder,"
and of being Sandinista agents. 'Castillo 1 tells Feldman that "I can. tell you for a
fact that John Hull knows both Rob Owen and Oliver North," and that North "is
the person who introduced me to the President of the United States last Tveek."
(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, pp. 82-83)

March 31, ,1986. — According to Currier; 'Castillo' said. Corbo was in Costa Rica
near Upala worked with Fernando El Negro Chamorro, that the CIA had an .asso-
ciation with Chamorro and Vidal, but that Corbo was a renegade; and that the-OIA
used Hulls farm until March 1984. (Deposition of Currier, Vol. 8, p. 224)

March 31, 1986.— Feldman concludes that 'Castillo' ie directing Justice to go after
Corbo and leave the other people alone. (Iran/Contra Deposition of Feldman, Appen-
dix B, Vol. 10, p. 85) . 1

March 31, 1986. — North notebook entry states "Call from (redacted) . . .Assistant
U.S. Attromey/2 FBI and resident agent— Rene Corbo, Terrell (Flako), CMA — Guns
to (redacted)/ (North, notebook #Q2078)

April 2, 1986. — Feldman becomes increasingly certain he is being watched while
in Costa Rica. Nagel, security -officer of.State at;Embassy, advised Kiszynski that
"the U.S. Ambassador is the law and [Feldmani Kiszynski etc] are here through his
graciousness, there are other agencies that had their .operational requirments, and
we should not interfere with the work of these agencies. ' (Iran/Contra Deposition of
Feldman, Appendix B, Vol. 10, p. 86)

April 3, 1986. — Hull calls Feldman, -tells him he won't speak to^ him on advise of
counsel. Feldman asks, whether anyone at the U.S. Embassy had advised him not to
talk. Hull denies this. Kirk Kotula at the embassy then admits 40 minutes later
that Kotula advised Hull not to talk. Feldman testifies-that he has. caught Hull in a
"dead lie." (Feldman 59) But Feldman tells Currier that Embassy staffer Fitzgerald
has. told him that Hull went to the embassy, spoke to Tambs, and that Hull Bad
been in contact with, the NSC regarding the FBI/ justice inquiry. (Iran/Contra Depc^
sition of Currier, Appendix B, Vol. 8, p. 227)

April 3, 1986, — State Department officer Nagel advises Feldman that "Hull is a
friend of Ronald Reagan, if you. understand" what I mean." (Iran/Contra Deposition
of Feldman, Appendix B, Vol. 10, p. 89 "They [at the embassy] seemed very protec-
tive of Mr. Hull and the others. They didn't interfere, but they were reluctant to
help." (Currier, Ibid., p. 224) ! T

April ,3, 1986.— Feldman is told by Vice Consul Paul Fitzgerald at Embassy that
Hull -had been contacted by the National Security Council and the Voice of America
during Feldman's visit. ftran/Coritra Deposition of Feldman', Appendix B, Vol 10 p.
89) Nagel is then fdUbwing Feldman around remainder 1 of trip, which has Feldman
increasingly unhappy. According to Feldman, after The Miami Herald writes about
this incident, Kotula told reporters Feldman lied about what happened at Embassy,
and the Embassy treated John Hull like they would 7 treat any other citizen. (Iran/
Cohtra\ Deposition of Feldman, Appendix B, Vol. 10, pp. 90-91)

April 4,:T986.— Feldmart, Kiszynskr and Currier return to Miami. -Currier contacts
FBI'HQ/s international terrorist unit to report, what Tambs, Castillo and the others
had told him while he was in Costa Rica. (Iran/Contra Deposition of Currier,- Appeh-
'dix B, Vol. 8, p. 228) Feldman a sks questions and raises issues about Boland Amend-
ment at meeting with Ana' Barnett, Larry Sharf, -Richard Gregorie and- Leon
Kellner, asking "whether there were criminal penalties, attached to Boland. They ask
David: Leiwaht to "pull a copy off the machine, and he enters meeting. Qran/Cohtra
Deposition of Feldman, Appendix B, VoL 10, pp. 97-98) Kellner can't remember who

157

the government officials were that were being discussed as being involved in connec
tion with looking at the Boland Amendment. Kellner recall "the? we? r££? at

Swrw but does not recaU them looking aMMfcS - Nortn

(Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, pp. 1128^1130) Greeorie r£
^ l^t^meetanffWsted two. hours, and tbat^Feldmanment^ Ol^SK
E - fellow- North who is behind, all of this" in the bureaucSy (Iran/
Contra Deposition of Gregorie, Appendix B, Vol. 12, p. 1164) Mark RiSd calk
Gregorie several times after this meetangyasking Gregorie to check withKel In pT£
see what thfe progress of the investigation is.". (Ibid., p. 1166) ?
. T £P^. 4 > 1986.— Feldman says that it was at this meeting that newsnaDers fDavid

place. He left the meeting with an order to write a memo so that they coSld^Sdf
ti^nX^S ^ d ^ P l0 H" ^er expresses .little interesTS KrSuy vSlt
tion. (Iran/Contra Deposition of Feldman, Appendix B, Vol 10 p 98)
™, • %f'il 986 -— K ^er remembers the meeting as including Barnett Sharf Gre-
S^vl^gTS 0 ? h ^ S6lf ' ^ nd that Feldman showed S a diSamSddl
iNorth JNbO and Robert Owen" on it. Feldman tells Kellner and the rest nfthl
group about his meeting with the CIA Station Chief Castillo. Kelmer does not
tor surprise. (fan/Contra Deposition of Kellner, Appendix B vT%pl041~S)
Richard says he talked to Kellner in this period regarding Garcia casJ but did not
Vf aS-ffe^ H d ™^fontra D^^SS&^^X
7f P- 93) Richard says to his, knowledge, no -one else did, either Richard ia^rS
whether he discussed with Kellner the.hnpHcatiohs of the GarScWeS^t^
case m regard to any pending votes in the Congress. Richard does not Swer ouS
tion directly Instead, Richard testifies there was "always' contioverev o^nfaS:
^F^Sgg*? but "from my perspective, in deXg wSnXS
thing with-the admimsti^tion issuing all sorts of statements saying, look the CIA
b not doing tins The NSC is not doing this. We were fighting [sic! by the Boland
Amendment. Wre'domg; this. We're acting in good faith, m coS P liance wSh Se
Jawe ■ . , we take the mvestigation where the facts take us . . . and^en^e takl
•S^u he ? ^ H n ? f Particularly popular judgment." (Irah/ConSa S^tioncl

SvtSmtS T* any retonship with John Huh, that it had preVi?

Anril TSlfi ^T^^^-PWto-etf Kchaid; Appendix B, Vol. 23, p t?)
-. A PfH 7 '. 1986.—Rob Qwen writes Oliver North/ describing in detail the tyJmai
mvestigation and the Feldman, Currier and Kiszynski visit to Costo Rica based on^
conversation he had with CIA station chief 'Thomas Castfflo.' CW noTeT Sat
lift *w ^ T 1 *^ .*» h ^ d a career on this case. He evS showlf ['CaS
S i] T^ Ambassador a diagram with your name at the top, mine underneath
and John glulls] underneath mine, theii a line connecting the various resSce
groups^ m.C,R Fddman steted they were looking .attSS ^ig ptoe"^^^?
only lookmg at ,a possible .viojation of the neutrahty act, but at Tpossible ^un^uthor
^use of government funds. (Exhibit TC-15, Iran/Conta comm S SS^
*f r ^ c f v « d ^ ^TS 1 ^aiding the Justice Depart^enTm^gaSon
from HuU, OA Station chief 'Thomas Castillo,' and possibly from AmWidor"
Tambs. (Iran/Contra, Appendix B, Vol. 20, p 832) ™m Amnassador

April 7,May^2, 1986.-rFeldman; works on memo about Garicia case, gnn-runnine
lor1l^?r l^^^lWtipn of Feldman, Appendix B?Vo™ 99)
Apnl Hi 198a-The Assqc^ated^Press reports that a federal investigation is under
way into assertions .that Niearaguan rebels and some of -their noigoverrmSSal
American backers have; engaged m,gun-running and drug traffic kin? ThelS Tavs
tiie mqunpr was "examining assertions that cocaine was smuggled to nelp fmSK

ickTeSelTS fS^h^V 116 ^utiahty Act was viSH^aSttSS
dact lerreU as stating he had been interviewed by the FBI on allegations concern

volvement orcontras in -drug smuggHng, and a reported conspiracy to assSate

S^^. Lem£ Tambs " ^ ±eport ~ - V" *™

• ' Ap ? ^ 198 1 6 ;" 2 ^e Boston Globe reports that U.S. Attorney's Office in Miami i R
" w^S-f Sf* Rations of extensive criminal activity by solSwSSinlTrS
mg with the contras that mclude gun-ruiminff ^and a-plot to attack U.S. EaTtesly m
Costa Rica. Story quotes Ana Barnett, spokesman to? Kellner, as saying 4t isl wJS
hot topic." Article quotes Senator Kerry as saying "over the^Sfew months St
^office has engaged m an mvestigation of alleged drug-smuggling, gun-niSSC
trality Act violations, and other equally, if not more serious cffeS^datf we

158

have received substantial corroboration for these activities. . . .• It's vital for. 'Con-
gress to investigate these matters fully in order to uncover the truth. '''"_,

April 11 1986.— Feldman discusses Associated Press article with Lellner and Har-
nett Peldman tells Kellner the Miami cases are a "hot potato." Kelmer'rephes,
"politics are not for me to consider, the only thing that I need to consider is the
evidence and the law." (Iran/Contra Deposition of Feldman, Appendix Vol. 10, p.

1Q Aprii 11, 1986,-rPoindexter writes memorandum of, "Senior Staff', meetm^ to dis-
cuss "FBI story on drugs and gun running by, contras." Poindexter Exrobits, Iran/
Contra Committees, p. 000041. / ; . "wxrV .

April 12 1986.— Attorney General, Meese visits Miami and meeta. with Kellner m
course of visiting FBI agents hospitalized after a shootout. Kellner meets Meese, at
airport and drives in convoy to hospital. At the,hospital, Meese calls Kellner aside
and asks him about the Garcia case, referring to the assassination plot. Kellner re-
plies that there is ho evidence for the assassination plot but that the gunrunning
was still under investigation. The conversation lasts only three minutes and Meese
asked no follow up questions. (Iran/Contra Deposition of Kellner, Appendix B, Vol.

U Apnl'l3f. lisl 4 — -Memo sent from Trott to Richard and Toensing'of Justice refer-
ring to the Boland Amendment and requesting a memorandum on the amendment.
It is triggered by "one of many Congressional requests for appointment of special
prosecutor." (Iran/Contra Deposition of Richard, Appendix B, Vol. 23, p. 48)

April 17 1986.— The Washington. Post reports that the Reagan Administration ac-
knowledges that some rebels "may have engaged in" drug trafficking, .but were not
acting on the orders of their leaders. According to the Post, Elliott Abrams devel-
oped a three page document for Congressman .Charles Stermohn ; stating that indi-
vidual members of the resistance . . . may liave engaged in such activity but it was,
insofar as we can determine, without the authorization of resistance leaders. (Post,
A-40)

April 17 1986.— Senator Kerry writes Senator Lugar, provides a summary of alle-
gations of criminal activities connected to contra supply operations, and asks for a
formal Senate' Foreign Relations Committee., investigation.. Among the activities
cited by Senator Kerry are the Tambs murder conspiracy, the La Penca bombing,
: drue smuggling connecting Columbia, Costa Rica, Nicaragua and the U.S., weapons
smuggling involving CMA and Brigade. 2506, transport of arms from Miami and
New Orleans to. contras. in Central Amerjc£. (Kerry-Lugar .Correspondence)

April 18 1986.— Oliver North writes in his notebook: 'Sheenan investigating La
Penca in consort with Sen/Kerry trying to get evidence Jinking RR to La Penca.
(North Notebook Q2i09) " „ t ... x - , tt-g

April 2t 1086.— Stephen Carr writes Feldman, care .of Kotula at US. Embassy in
Costa Rica, asking for opportunity to cooperate so tnat he caji get out of jail. (Iran/
Contra Deposition of Feldman, Appendix'B, Vol. 1.0, p. 105)

April 22 1986 —Kerry staff provides detailed information on its investigation, in-
cludmg a list of targets, to Committee staff of the Senate Foreign Relations Commit-
tee. Entry in Nortii notebook reads: Bill Perry— Kerry investigation— violations.
(North notebook Q211I 1 ) ; ' ' T ' XT ' ■ ; ':

April 24, 1986.— Feldman meets with Kellner. No notes of what was discussed.
aran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 106) ... *

April 25, 1986.— Feldmanr'agaih meets with Kellner. No notes of what was dis-
cussed. (Iran/Contra Deposition of Feldman, Appendix By Vol. 10, p. 105)

April '26^ 1986:— Feldman again -meets with Kellner, no notes of what was dis-
cussed (Iran/Contra Deposition of Feldman, Appendix B," Vol.. 10, p. -105) Feldman
works on first draft of his prOsecutoral memo, down playing the myestigation, but
recommending a grand jury. It was the first of many versions of the Teldman
memo all dated May 14. There are six in all (Iran/Contra Deposition of Cumer,
Appendix B, Vol. 8, pp. 233-235) • „ " - , . . ,

April 28 1986 —Feldman submits first draft to Kellner, who advises him: that he
does not like it because it is not sufficiently detailed. Feldman rewrites it -Feldman
savs "investigation has dispelled Garcia's story,' [but] we have learned CME (sic)
rCMAI actively assisted FDN in Honduras, Costa Rica between November 84 and
April '85 There is no questionRene Corbo and CME [sic]. actively recruited.individ-
uals in the U.S. to train and/or fight with the FDN and contras; further investiga-
tion may also verify Carres claim the weapons were among the items shipped from
the U.S. to Salvador." , (Iran/Contra -Deposition of Feldman, Appendix B, Vol. 10, p.

**April 28, 1986. — Kellner says Feldman memo started in middle and its conclusion,
"further investigation may also verify Carr's claim^that weapons were among the

159

items shipped from the United States to San Salvador, El Salvador," was inad-
equate, Kellner says he intended it to goto Washington, and wanted it to be clear
and formal. (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, pp. 1059-1060)

April 30, 1986.— Miami Herald reports "that North's activities may have violated
Boland Amendment, citing his involvement in fund-raising for contras. (Miami
Herald, 8-A) Sometime in this period, Feldman shows Currier revised memoran-
dum. Feldman tells Currier that Kellner had told him to change the recommenda-
tion for the grand jury and that instead it concluded that the grand jury was prema-
ture. This version did" not'include the -"fishing expedition" language, 'and that lan-
guage was not included in the version the FBI was given in June of 1986. Currier
never sees the "fishing expedition" version until after Iran/Contra came to light
(Iran/Contra Deposition of Currier, Appendix B, Vol. 8, pp. 234-235)

May L 1986.— Pat Korten, public affairs, U.S. Department of Justice tells AP that
there is ho substance to gunrunnihg charges. "It's a classic case of much ado about
nothing. The U.S. Attorney and the FBI have conducted an inquiry into all of the
charges and none of them have any substance. It's unfortunate the junior Senator
from Massachusetts puts more credence in them than we do. All leads were com-
pletely exhausted. Interviews were conducted in Florida, Louisiana Central America
and turned up. absolutely nothing. "We ran it down and there' isn't anything there."
(AP) Currier testifies that the FBI never interviewed Owen or Posey, two targets of
the investigation.. However, the FBI had by then interviewed Corbo and cbrroborat-
ed-tbe fact that flights had occurred weapons were on board, and Corbo and others
were recruiting individuals from Miami to fight with the contras. (Iran/Contra Dep-
osition of Currier, Appendix By Vol. 8, pp. 237-239)

May 1, 1986.— North notebook entry reads: -"Mtg w/(redacted) re Kerry travel.
(Q2127) " .. 1

Early May, 1986.— Kellner is annoyed at press reports saying there was no inves-
tigation of Garcia case and asks Barnett to call Washington and say it was wrong
that in fact there was an investigation going forward. Barnett calls Pat Korten.
Kellner decides that he will send Feldman memo to Washington to counter these
misstatements. (Iran/Contra Deposition of Kellner, Appendix B, Vol. 14, pp. 1055-
1056)

May 2, 1986.— Representatives of the FBI; Justice Department, DEA, and State-
ment Department meet to discuss the approach of their,Agencies to responding to
Senator Kerry's attempts to convene hearings on allegations concerning the Con-
tras. (Subcommittee Deposition of Tom Marum, October 25, 1988)

May 5, 1986.— National Public Radio reports that Senator Kerry's staff has been
investigating charges of illegal activity involving not only contras hut American offi-
cials with ties to the National Security Council, and names Lt. Col North. NPR
piece includes statement of Jack Terrell that he has seen direct involvement of CIA
in the field and NSC money going to Costa Rica. NPR piece includes statements by
officials at Justice Department who say that inquiry stopped "a month ago." Ac-
cording to NPR, a Justice spokesman said that "U.S. Attorney in South Florida and
the FBI conducted an inquiry into all of these charges and none of them have any
substance. All leads were completely exhausted, and interviews in Florida, Louisi-
ana and Central America turned up absolutely nothing."

May 5, 1986.— Kellner and Feldman meet to discuss memo again. (Iran/Contra
Deposition of Feldman, Appendix B, Vol. 10, p. 1075'

Slay 6, 1986.— Republican Foreign Relations staff member Rick Messick sets up
meeting or representatives of FBI, Justice, CIA, State Department, DEA, and
NHAQ to meet with Senator Kerry's staff (Rosenblith, McCall and.Winer) regarding
allegations. Senator Kerry's staff details allegations about Neutrality Act violations
in Florida. CIA representatives state that the allegations are, false. The CIA repre^
sentatives state that they have information regarding the specific flights involved
cited by the Kerry staff, specifically including a March 6, 1985 flight. The CIA rep-
resentatives state that no weapons were aboard the planes. Tom Marum of Justice
states that Justice is conducting an ongoing investigation of the charges. Ken Berg-
quist states that the public statements by the Justice Department to the contrary
are "inaccurate." (Winer Memcom, 5/6/86; : Marum Memcom, 5/6/86- Messick
Memcom, 5/6/86, Subcommittee Files)

May 6, 1986.— A spokesman for Justice Department tells The New York Times
that charges regarding gu nr u nn ing are false, that "all leads have been completely
exhausted" and that no further investigation is needed. {The New York Times, A-6)

May 9, 1986.— After previously' meeting with FBI Assistant Director Oliver B
Revell, North meets with FBI agents, and asks them to investigate half a dozen
people whose activities he believed were tied to foreign agents, mduding Terren and
Senator Kerry! (FBI documents, Iran/Contra Appendix A, pp. 798-800)

160

May 12, 1986.— Justice writes Senator Kerry, asking him to provide evidence of
allegations. (Justice-Kerry correspondence)'

May 12, 1986. — John Hull writes George Kiszynsky and Kevin Currier of FBI to
advise .them that he has been told the- investigation against him has "been dropped
for lack of evidence." (Hull-FBI correspondence).

May 13, 1986.— John Hull writes Ambassador Tambs asking for advice from the
political and legal department of the U.S. Embassy, and advising Tainbs that Hull
will riot mail letter to Kiszynsky and Currier of May 12 (wt\ich Hull encloses) with-
out the permission of Tambs arid CIA station: chief 'Thomas Castillo.' (HulPTambs
correspondence) . : ., "

May 13, 1986.— North notebook entry reads: "19:30^Call from Rick Messick— Ter-
rell told not to talk to FBI, Jonathan Winer [sic, reference to Kerry aide] (redacted).
Q2146 . . .

May 13, 1986.— Deputy Assistant Attorney General Ken Bergquist writes memo-
randum to Assistant Attorney General Steve Trott regarding the "Upcoming
'Contra' Hearings in' the Senate Foreign .Relations Committee." Bergquist provides
Trott with a list of the participants in the May 6, meeting with. Senator Lugar's and
Senator Kerry's staff, and an outline of what was discussed at the meeting. Berg-
quist advises Trott that "the obvious intent of Senator Kerry is to try to orchestrate
a series of sensational accusations against the 'Contras' in order to obtain massive
press coverage at about the time of the next 'Contra Aid' vote. It does not matter
that the accusations are unfounded as long as they are uncontested at the 'time they
are presented. If we are unable to immediately and effectively provide the;true facts
in each allegation at the time of the hearing, perception, will defeat reality and the
true story will never be heard or appreciated, 1 Bergquist recommends th&t Justice
provide information to the Committee regarding the individuals identified by Kerry
as making the charges concerning the Contras. Bergquist' states .thai ' Senator
Kerry will take every opportunity to make the implication or express; claim that
there is a conspiracy within the Administration to cover up illegal activities of >the
'Contras' and their supporters," and suggests that Justice work instead to show the
"true story." (BergquisVTrott memo)

May 14, 1986. — Senator Kerry writes Justice that he would be glad to have his
staff meet again with Justice to discuss such allegations further. Justice does not
respond to this letter until June 24. (Justice-Kerry correspondence)

May 14, 1986. — Miami Herald reports that Senator Kerry's staff is, looking into
charges of gunrunniiig and drug smuggling as well as White House 'involvement
with the contras during the time such involvement" was prohibited by Boland
Amendment.

May 14, 1986. — AUSA Feldman and FBI Agent Currier meet, go over, memo line
by line, and both conclude that they should go forward with a grand jury investiga-
tion. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 107) -

May 14, 1986.— Draft of "Feldman memo setting forth the prosecution's case in
connection with the Miami Neutrality Act prosecution of Rene Cprvo,.et ah, .states
"a grand jury investigation would ultimately reveal gun running activity, including
gun running and neutrality violations.. Due to the political nature of this case'; I am
not sure such violations could be sucessfully prosecuted in South Florida.". (Iran/
Contra Deposition of Feldman, Appendix B, Vot 10, p. . 108) Kellner, scribbles out
last paragraph and inserted, "I concur* we have sufficient evidence to institute a
grand jury investigation into the activities described herein.". (Iran/Congra Deposi-
tion of Feldman, Appendix B, Vol. 10, pp. 108-109; Iran/Contra Deposition of
Kellrier, Appendix B, Vol. 14, p. 1060

May 20, 1986.— Sharf, Baimett, Kellner and Feldman meet. Sharf expresses oppor
sitiori to going to grand jury. At end of meeting, Kellner asks Feldinan" to change
conclusion of memo and he agrees to do so.. At end of riieeting, Feldman rewrites
memo to state, "I conclude that we have sufficient evidence to continue the investi-
gation into the activities described herein. At present it would be premature to, take
t.his matter to the .grand jury, some background, work still needs to. be finished.
Upon completion of this work, I believe a grand jury investigation may be in order."
Kellrier, emphasizes that he is concerned about not destroying reputations. Feldman
says he had concerns about what they were doing,' .because there, were articles in
the New York Times, and "I questioned in my own mind at that point whether or
not there was. some fishy business going on." (Iran/Contra Deposition of Feldman,
Appendix B,yol. 10, pp. 113-115) , . .:

May 20, 1986. — Gregorie recalls being at. above riieeting, that Feldman had the
facts together, that "there were all kinds of unanswered questions, people obviously
lying* individuals who had given us half the facts arid half truths. . . up to that
time, he had some wild stories that were concocted by freelance newspaper report-

161

ers about mercenaries who were unreliable and T HiH nnt thi^i- m
^2 g n fife* ^i^\Oran/Gonfra ^Sa^f&S^^^^

1181) u ^cvuun. uran/ixMitra ^Deposition of Gregorie, Appendix B, VoL 12; p.

- May 23, 1986.— Deputy Assistant AG Bergquist writes Assist™* ap tw+ +
on requests for information regarding StevS St Jack SSLtJ™? ° - P ^ S

c^&^ssEszxsarvS iTd™ heroin — ^

case and developments. In response,- Kellner providedHm boiS SI vJxt* ^

162

June 3, -1986.— ^FBI Agents meet -with Oliver. North who "expressed specific con-
cern as to why. no action "has been' taken regarding . '. charges' placed -by Senator
Kerry against North, nor any attempt to obtain the information presently at the
Department of Justice (DO J) involving Senator Kerry's allegations." In aT June 11,
1986 memo relating to this meeting, the FBI Agents conclude to the Director that
"WFO [FBI's Washington. Field Office] has no ^predication into this investigation."
(Iran/Contra, Appendix A, Vol: 1, p. 805)

Sometime after June 2, 1986.^-The Feldman memo is leaked to the -press *and to
Congressional staff. In his testimony before the Iran/Contra Committees, Feldma n
is asked who leaked it. He says he does' not know, but that "the memo was stolen
out. of my cabinet," ^because a note attached to it about ["Thomas'] Castillo and John
Hull showed up under hisdoor several months later.' That note' was the "most sensi-
tive footnote in the entire memorandum" because it suggested that Hull was an- op-
erative for the CIAi Feldman notes that he didn't lock his office or file iabinet, be-
cause both- were inm secure area, and "all you are locking- your door from" are your
colleagues." Feldman notes* 11 wasn't cynical enough." (fran/Gontra Deposition of
Feldman, Appendix B, Vol. 10, p. 129) - " '

.June 4, 1986.— FBI 302 report on-interview with Rene Corvo states that Corvo told
FBI "the only crime he has committed are United .States neutrality violations for
shipping weapons from South Florida to Central America. These weapons were des-
tined for the 'contras'." Corvo confirms details of allegations made by Carr regard-
ing the shipment of weapons from Ft. Lauderdale on March 6, 1985, and involve-
ment of Salvadorean military officials in his contra supply operation. (FBI 302 re-
leased in U.S. v. Corbo, SD Florida, 1988) (On May 6, 1986, the CIAJiad advised the
Senate Foreign Relations Committee that it had specific intelligence that these alle-
gations regarding Corvo were false.) ■ '

June 8, 1986.— Miami Herald runs frontpage story by Alfonso Chardy, stating
that NSC and CIA managed contras during Boland Amendment, in £ network over-
seen by North with help-from CIA. Chardy story cites Owen, and Singlaub as among
those helping North, and naming -Hull as one of Owen's contacts. (Miami Herald)

June 10, 1986. — AP rtuns story by Robert Parry and Brian Barger aUeging-that
Reagan Administration managed 'private' contra aid network through North, using
Robert Owen as a "buffer," and John Hull in Costa Rica. (AP)

June 10, 1986.— Feldman discusses Mattes and Garcia.with Keener. (Iran/Gontra.
Deposition of Feldman, Appendix B, Vol. 10,-p. 130) .< - '

June 11, 19.86.— FBI Agents report to Director that the Christie "Institute com-
plaint-filed in Miami names individuals who "are presently aiding the -Contra effort
under Colonel North's direction." (Iran/Contra, Appendix A,!^. 803>

June 11, 1986:— Associated 1 Press reports that "U.S: Allegedly Ran Private Net-
work to Arm Contras." The article stated that "the White. House, working through
outside intermediaries, managed a private aid network that provided militar y assist-
ance to Nicaraguan rebels during last year's congressional aid ban, according to gov-
ernment officials, rebel leaders and their American supporters." (Baltimore Sun, p.

^■June 12, 1986.— Washington Times reports that Kerry contra probe is "witch
hunt."

June 13, 1986. — FBI 302 interview of Rene Corbo, in which Corbo again confirms
his transport of weapons from South Florida into Central America for the contra on
March 6, 1985 and June 16, 1985, Corbo also confirms that John Hull provided as-
sistance to his and other Contra support groups in Northern Costa Rica.

June 17, 1986.-^FBI 302 interview of Francisco Hernandez, in which Hernandez
again confirms involvement in Contra- support operations in Northern Costa Rica
involving Rene Corvo. Hernandez states that, he and other supporters of the Contras
were assisted from military officials at Hopango in El Salvador.

June 17, 1986.— North writes in notebook, "Gene Wheaton wants to talk to
PFIAB— has talked to Kerry." Q2223

June 20, 1986.— Feldman leaves for Thailand^ He remai n s "out of pocket- until
August 1. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p. 13J);. ^

June 24, 1986.— After Kerry staff contacts Rick Messick of FRC to say that Justice
has never called- to' gather further information regarding allegations, Justice sends
another letter to Kerry reaffirming its interest in "vigorously and expeditiously" in-
vestigating any evidence to support' allegations -of . criminal' activity. (Kerry-Justice
correspondence) - •

' June 25, 1986.— Senator Kerry makes a presentation beforeta closed door session
of the Committee. In that presentation, ^Senator-Kerry states thatm looking at alle-
gations concerning the Contras he had found that "some. American officials decided
to circumvent the clear prohibitions of the Boland Amendment, as a result of that it

163 ~

appears that the contras and the infrastructure set up to support them determined
that they had a license in a sense, to violate laws .\ %" He also reviews allegations
regarding narcotics trafficking involving, the Bahamas and Panama and calls for an
investigation of the links between narcotics trafficking, law enforcement and foreign
policy. At conclusion of session, Richard Lugar announces publicly that Foreign Re-
lations Committee has ordered a "staff inquiry"' to review allegations of drug run-
ning involving contras and Sandinistas.

June^S, 1986.— Kerry responds to Justice letter, again inviting Justice to contact
his staff to set up a meeting to provide further information on the allegations con-
cerning criminal activity m connection with the Contras. Justice never responds
(Kerry-Justice correspondence)

July 11, 1986.— Glenn Robinette meets Jack Terrell, as part of an investigation of
1 erreU on behalf of the Secord enterprise. (Iran/Contra Appendix A, Vol. 1,- pp. 819-
833)

July 14, 1986.— CBS Evening News broadcasts a tape which includes a segment on
Oliver North s alleged involvement as a liaison between the White House and the
Contras. On July 18, 1986, Special Agents of the FBI review the July 14, 1986 broad-
cast regarding North m connection with their investigation of Jack Terrell (Iran/
| Contra, Appendix A, Vol. 1, p. 814) .

July 15, 1986.— FBI reports to Director of alleged threat to assassinate President
Reagan by Jack Terrell from a source not specified. (Ibid., p. 819) (Later Terrell is
polygraphed on the issue and the FBI concludes the allegation is false )

July 17, 1986.— FBI agents meet with Glenn Robinette "believed to be working in
an unspecified government capacity" regarding Terrell and Robinette's surveillance
?i lm r m behalf of the Secord's enterprise. (Ibid., pp. 820-829) Robinette advises
the FBI of Terrell s ties to the Kerry investigation, notes that Terrell stated that he
received no funds from Senator Kerry, and- that he was aware of Secord's involve-

ment oSv C0Vert 3X1 su PP° rt on behalf of the, Contras. (Iran/Contra Appendix A, Vol.
1, p. 832)

July 18, 0986. — A dozen FBI agents meet in Washington and agree to undertake
full-time FBI Special Operations Group surveillance of Jack Terrell. (Iran/Contra
Appendix A, VoL 1, p. 812)

July 18, 1986.— CIA advises FBI that subjects of Miami Neutrality Act investiga-
tion Corbo, Carr, Thompson, Posey and Garcia are not CIA assets. No mention is
made of Hull or Felipe Vidal. (Letter to Director Webster regarding Jack Terrell
allegations.) ,

July 21i 1986.— Kerry writes Attorney Generallvieese, enclosing an article in The
Boston Globe which reports that the CIA provided financial and other assistance for
mercenaries fighting with the contras. Kerry asks for a summary of any investiga-
tions Justice has undertaken into Neutrality Act or Boland Amendment allegations
in connection with the contras. The Attorney General does not respond to the re-
quest. (Kerry-Justice correspondence)

July 22 1986.— North is interviewed by FBI agents in connection with their inves-
tigation of Jack Terrell. North advises the FBI that "Terrell's name had surfaced in
connection with a staff investigation being conducted by Massachusetts Senator
John Kerry*, and denies that he is involved with managing Contra support efforts
(Iran/Contra* Appendix A, VoL 1, pp. 878-879) -

^ JuI ;?\ 24; 198 1 6 T State Department issues a Report to' the Congress which states
that the available evidence points to involvement with drug traffickers by a limit-
ed number of persons having various kinds of affiliations with or political sympa-
thies for [the Contra] resistance groups:" (State Department Document #5136c)

- July 24, 1986.— Robinette meets with FBI officials regarding Terrell expressing
concerns that the FBI had targeted Robinette "as beihg a 'plumber 1 fbr the White
House . . e. and leaking information to the media concerning his contact with hrm "
He confirmed knowing North and working for Secord. (Iran/Contra Appendix A
Vol. 1, pp. 852-853) j

July 25, 1986.— North writes Admiral Pbindexter that Associate FBI Director
Oliver Buck' Revell had called and asked for any information which NSC might
have regarding Terrell. According to North, FBI believes Terrell could be a paid
asset of Nicaraguan&ntelligenee Service. (N45907,- Iran Contra committees)

July 28, 1986.— North writes memo from Poindexter ta President Reagan regard-
ing Terrell, initialed and presumably read by the President, which describes *anti-
contra and anti-U.S; activities by U.S. citizens Jack Terrell, Memo describes allega-
tions about Tambs bombing, alleged, activities of CMA including weapons and nar-
l cotics trafficking, states that Terrell's charg^are at the center of Senator Kerry's

investigation in the Senate Foreign Relations Committee, and that the Operations
Rff Sub-Group (OSG) of the Terrorist Incident Working Group (TIWG) has made avail- ^

?!

164

able to the FBI.all information on- Mr. Terrell from other. U.S. -government agencies
to consolidate it for investigating Terrell' (N454896; Iran/ Contra committees) Pom-
dexter memo to President states "it is important to note that'Terrell has been a
principal witness against supporters of the Nicaraguan resistance/both in and out-
side the U-S. government," and. "since it-is important to protect the knowledge that
Terrell is the subject of a criminal investigation, none of those with whom he has
been in contact on the Hill have been advised." (N-45897, Iran/contra committees)

July 28, 1986.— FBI Special Agents conduct surveillance of Jack Terrell at Mariott
Hotel in Miami arid go through Jiis trash when- he leaves:his hotel room- They find
.a-newspaper with an article torn from it concerning statements by ; Admiral John
Poindexter that "the relationship between the Nicaraguan Contras and Colonel
Oliver North did not violate a congressional prohibition on United'States involve-
ment with the rebels." (FBI 302 reprinted in- Appendix A, Iran/Contra)

July 31, 1986.— Feldman receives "PROS" memo, or prosecution memorandum,
from Kevin Currier of FBI, who was "looking for a way to pressure Leon, into
making a decision." (Feldman 102) According to" Currier, the^memorandum ran -200
pages and was written "to force their hand." Currier describes it as "a 200 page
prosecutive report which outlines the violations and the evidence we had obtained
to that time to support the prosecution of this matter." (Iran/Contra Deposition of
Currier, Appendix B, Vol. 8, p. 238) However, "nothing happened in response to the
prosecutor's report. ', Nothing. Currier testified --that "Kellner told Feldman to do
nothing on case until he made a decision on the'prosecutor's report. The U.S. Attor-
ney's office was dragging its feet on this matter.We frequently went to Feldman's
office or the USA's office to pressure Feldman to make a decision, calling two or
three times a week." (Currier, Ibid., pp. 238-244) Among the.names which came up
in the investigation were Enrique Bermudez, Mario and Adolfo Calero, Felix Rodri-
guez, Ramon Medina {Luis Posada], Richard Miller, -Raiael Quintero, Richard
Secord, Ted Shackley and John Singlaub.. (Currier, ibid.; pp, 255-261)

August 5, 1986. — Richard Lugar and Claiborne Pell, as "chairman and ranking
member of Senate Foreign Relations Committee, jointly request information from
Justice Department regarding 27 individuals for its investigation -of narcotics- traf-
ficking. The request, based on a list supplied by Senator: Kerry, included- requests
for information on John Hull, Robert Owen, Tom. Posey, Luis Rodriguez, Frank
Chanes, and Frank Castro. (FRC records)

August 8, 198&— -John Hull sends a letter to Leon Kellner, Senator Rudman and
Senator Lugar, charging Senator Kerry's staff with bribing witnesses to lie about
Hull, North, and- the Contras. The letter mentions "^Democratic funds." (Iran/
Contra Deposition of Kellner, Appendix B, Vol. 14, p. 1091) Hull asks Robert Owen,
North's courier, to transmit the letter to Kellner and to the Senate Ethics Commit
tee. (Iran/Contra Deposition of Robert Owen, Appendix B, Vol. 20, p; 856)

August 11, 1986. — John Bolton, on behalf of Justice, writes Lugar and Pell to tell
them that Justice will not disclose information gathered- during pending investiga-
tions and therefor will not provide any "information in response to the request, but
"we remain convinced that further rambling through open investigations gravely
risks compromising those efforts." (FRC files) T - <_ ""

August 18, 1986. — Feldman gives Kellner the PROS memo, from which he con-
cludes there is clearly sufficient evidence to go forward. Corbo has admitted there
were weapons on ; the March 6 shipment. Feldman. believes they have enough to go
forward, noting that he believed that in May, but that now they clearly had enough
to satisfy Kellner,. (Iran/Contra Deposition of Feldman, Appendix B, Vol. 10, p.. 132)
Kellner describes PROS memo as being "quite thick," puts a little yellow sticker- on
it and. sends it to First Assistant US -Attorney Richard Gregorie,.(Iran/Contra Depo-
sition of Kellner, Appendix B, Vol. 14,-pp. 1078-1079) >i

August 18-August 29, 1986.— Feldman goes to Kellner on several occasions in re-
sponse to pressure from FBI Agent Currier,, "nagging him to make^ decision."
Kellner states that he must still read the memo and makes ho decision. (Iran/
Contra Deposition of.Feldman,' Appendix B, Vol; 10, p. 133) - - f

August 19, 1986.— Justice sends letter to Senators Lugar and Pell, informing them
that Justice would examine its files, but would only make information" available on
the one closed case, involving Cabezes and Zavala (Frogman -Case,)

August -20, 1986.— -Feldman has.- his "only" : conversation with, people at. Justice,
with Joe Tafe, who is in. charge- of neutrality violations. Tafe -'gave -me hints."
(Iran/Contra Deposition of Feldman, Appendix B, Vol. 10,~p. 133) "

August-,27, 1986.— -Kellner says, this is the day lie actually received August 8 letter
from John Hull charging that Kerry staff had engaged in misconduct. .Kellner "had
difficulty with those 1 documents." <Iran/ Contra Deposition of Kellner, Appendix B,
Vol. 14,- p: 1082) ■

165 ^

K or so in August

back from Washington DC," be^T^olf^^ s ? °?„ the case he lets
that ^really u Upsetme because be told me on A^? 1 ^- P # n » n sa ^ "Leo?
shooting that politics were not a tonsTderatio^ " n ° rthe *M

^ ei 2 a r, faCtor for y° u to c^ider b™v S a flvSJ?f ^Feldman, "politics

ard in Justice,' and on 7& rete^ef tffS%Sr^ e ^ to ^
memos on the Neutrality Act, and fiS FelZa? tf .ww^ brings back some
the affidavits concerning Senator Kerrv k3w ch ^ them and to investigate
about Senator Kerry m h£ Sncf bui faifcthS? reiad
vits were "amateurish," and "did lot makf t^^F^l beli eved the affida-
by somebody," but "couldn't 4S^t^'MgS n< S? r^J" was Bet U P

to have him investigate a SeD^^^toe^^JvT^ someo ™ was trying
Sf^ator." After meeting with Richard KeUnS Sfp^Tf^ 01 to em t>a™thl
gie truth" of the affidavits by Svesti^wT^ Si El -? ard . he w<mld "<*eck out
Feldman believed them. KelLS lesSS? the SffiSS** neither, he nor

gations, but it 'Wd impact on tfcU e ^ er jays he did not believe these alle-
Kellner, Appendix ^oT^^igJ^^L^e^ Deposition of
mgt Mj with charges about^sSator Kerry &Se 7^^- he T** to
cnme/' and didn't do so with the alleSSL reSdfL^S r 33 • an ^£^011 of a
were stdl questioning whether or not therew^fS ^ e C 5 a "?* case because "we
doing." Oran/Contra Decoction nf^In^ ^ cnme involved in what they were

the senator's staff, attempts by^brteS ?n fn>(S *f £ questionable activities by
and the like. (Iran/ContrS vZZSm and suborn perjurJ

^testifies that he ^JdS^Sb^S^^f^ V? 1 -" ?> * 88 >
either the Publice Integrity Section of JiLt£ ! Tfl a . n °? e th " at lfc be handled by
it was decided to ask the FBI tosee SwSShSt ^£f st -| nt ™ w Hull. Ultimately

ST* ^ ard says he had no ^^thSKS^SSf to T bmi L t0 ^ mter

did anything or. not. -Richard says Kelhier TSff fi2^ } ^ and wnet her the FBI
. ed his assessment" thatSlnef w ^^^^^ from Hull '^vindicat-

eryone had their own agenda ^ witi^'KeSv^ Srfe te<f h J poIitical forces wherein
of-I don't know who^&e CLa! fl» TonSs 'of wW^ g ^ actions

Richard, Appendix B, Vol. 23 p 89) COntEas ' or what - Oran/Contra Deposition of

s^a^SeS^ against Senator Kerry's

''they weren't true." Kellner nS that ^hf^i P he could contact" that

tiiat at least in one case ttS s5,?L^ ■I^^j""'^-^ 6 ^ davits
they not write some of these Slw accurate. La addition, "not only did

Feldman t|d KeW ^aftoS^ rf^^^,^ 1 ^ true ^ ^ny etlnt"
defaming Kerry and Kerry's staff h«,™ -f persons said he wrote the affidavit
: aran/Con^aSpo^on e of£^ A^Sdix^of iTo ^oRf 0Ut ° f <**^

tioS^eK Garcia's aHega-

dix B, VoL 10, p. 140) Hen ? en cmg- (Iran/Contra Deposition of Feldman, Appen-

George- Schenck. Bergquist^d SchenS ■ n KeUner - Chuck Sapho and

^pSo^^^ r ^ D ff^^K^f day ofHase^
crash may have figured in his de^sin^ m jury. As Kellner concludes, the

^^^W^^^^P^m^B^^^ 0 ^ DepositTon of

jsut that it hadn ? t received the pubKc TV£ S^dy been done. It is

AJthough Feldman does not find S£ ^Z^ef^SfS^^^

166

U S Attorney to Kellner, sends memo to Feldman on thin day autiiorizing , him to go
to- grand jury. (Iran/Contra Deposition of Feldman, Appendix B, Vol. .10, pp. 140,

^October 7 198$ —William Weld asks Richard what he knows about Hasenfus
crash, who calls Tom Marum about -Miami Neutrality investigation. Richard con-
tacta^KeUner and asks Kellner what is going on. Kellner is angry, because he is
"getting hit -with press inquiries and knew nothing about the pending mvestiga-
tion.^tran/Gontra Deposition of Richard, Appendix B, Vol. 23, p. 106)

October 14, 1986,-Senator Kerry releases staff report describing :J Private Assist-
ance and the Contras." Report refers to activities of North, Owen, Secord, Binglaub,
Felipe Vidal, Hull, and others. Includes statement, that "Max Gomez [Fehx Rcdri-
quezj was managing contra supply operations out of Ilopango having allegedly been
, placed there lay -NSC." . ' w _ , ; , ,

October 15, 1986.— Washington Post prints story about Kerry Report and de-
scribes its allegations against persons named above. : v

October 15, 1986,-Oliver North writes m notebook is
something redacted, and below that a notation"Max Gomez/VP. North Q2583.
- October 15, 1986.— Oliver North Notebook describes June 25th closed session of
Foreign Relations Committee regarding narcotics trafficking and contras. Notebook
states "list of 27 -witnesses, early August 8^sent to DO J-Ken fiergqmst Vicky
Toennsing— 46 boxes of transcripts, of SF Frogman case, Justice never provided. In
April/May, (illegible) Rick Messick . . . John Kerry-has 8 votes. Scott Armstrong,
Natl Security Archives, Jack Blum. (North Notebook ^Q25dl ... - -■

October .24 1986. North writes -in notebook about 6:30 pm meeting witlv Assistant
Secretary. -ofVDefense Richard Armitage, that Senate ^Foreign Relations^ Committee
investigation has taken trips to Miami, Costa . Rica, San Francisco W Honduras.
(North notebook Q2566) - n ^ ... d ,. - ,

October 30,- 1986. Feldman meets with Justice Public Integrity faection. (Iran/
Contra Deposition of Feldman, Appendix B, Vol. 10, p. 140 ; • % •" ■ , .
Earlv November, 1986.— Feldman receives authorization to go to the grand jury.
November 18, 1986.— Feldman takes Neutrality Case to Grand Jury.^ran/Contra
Deposition of Feldman, Appendix B, Vol. 10, p. 143) ■ >" .

November 19; 1986.— North notebook entry reads "Tom Dowhng re Kerry Hear-
ings." (North Notebook Q2646) ■ - ' . -

November 21, 1986.— North notebook entry describes concerns about information
known by Gene Wheaton, who has ^ehar^Tegarding SecOrds involvement in both
Iran and contra initiatives, and who has provided information to Senator Kerry.

November 22, 1986.— Iran/contra diversion memorandum is found by Justice De-
partment investigators in North's safe at the NSC. _ .

December 2, 1986.— Feldman meets with Kellner, Sharf, Gregone, Barnett, about
Garcia case, and they tell Feldman to stay away from Jose Coutm case.^Coutin was
being held as the supplier of the weapon used to kill DEA mformant Barry Seale,
buthad originally helped the FBI in the Garcia' case). Feldman gets authorization to
take Robert Owei to a grand jury. He finds out that .Owen was at "tons' of meet-
ings with "players involved hi both the Cuban and CMA organizations. (Iran/
Contra Deposition of Feldman, Appendix B,VoL 10, pp. 147, 149) : , , f •

December 29, 1986.— Grand Jury halts m order that case may be reviewed by In-
dependent Counsel Walsh. (Iran/Contra Deposition ofTeldman, Appendix B, Vol.

10 Jmuarv 21 1987.— Independent Counsel Walsh declines Miami Neutrality Act
caseTand Felo^an proceeds. aran/Contra Deposition of Feldman, Appendix B r Vol.

19^87.— -Feldman is interviewed by Independent Counsel Walsh's office.
'(Iran/Contra Deposition of Feldman, Appendix^, VoL 10,-& 15f» ' . , . x ,

Aueust 10 1987 —FBI 302 of Frank Castro. Castro statesthat in 1985 he went,to
Cost^Rica to meet with John Hull at HuU'S farm, arid that he was working _mth
Frank Chanes and Moises Nunezwith Rene Corvo and other Cubans, and that this
CTOu?had taken a number of Mariel.bpat Cubans from their training, camp in
Naples Florida to Central America to fight the S^ndmistes. ,. .. - -■ . ;
August 20, 1987—FBi 302 of Frank Castro, Castro reaffirins statements regarding
' movement 6f Corbo and others in military trainmg. in Naples, Florida before going
to Central America to fight Sandinistas.^ . T . ._ - '. . ; y , ,

September 30, 1987.-The Justice Department indicts. Luis Rodnquez as a .drug^
trafficker for smuggling which took .place between November 1980 t and January
WSSM^ 87-01044, U.S. District Court for the Northern District

ofFlorida) . -

167

^ar^ meet with

partment's Internal Security DivSlorT At , ? "TS** h «L d ° f th ^ Justice De-
Feldman reviewed the prSSus SSstioS fthSwR befween J 9:3 1 °. 10:20 am,

partment's handling of ^EMLStoSSSSn^- i^'^S abpUt ^ Justice ^
David Leiwant conirnhS T^o^ S^^° lU ^ g & ^ le S a ^ ^ by
Kellner to delay with the case? S rSf^-T ma £ e on A P rfl 4 * 198 6 asking

delay in pSuffthe Z Tb^JZTf? J? ^f? 1 *^ memoradum; andSf

Richard, Leon Kellner, and ■rSSJ^'ai3Fm^^ a t- h ? 5? Tafe ' Maxk
time last year to discuss how Senate? . met ^^terd 's. office some-

in tins case co«W be^Sfe^^S^^ £** Jgg* to hold hearings
contemporaneous memorandum of the ^eetin? S ffit- el( ^ ^ makes a
stamps it at the Criminal Div£i<£ of the" jSS> & 5^ m . an i d 1 Maru ™ and time

coSiS^^ evasion in

through April 1985. (U.S. S RodwJt A% ??g g^^T June 1979
Southern District of Florida) &Sdto?rtaLS^ f T ,^"^ T U l I)istridt Court
Florida narcotics case ae^mrt -TrSf SJ- stateme ^» an file m Northern District of
Ushed to E2£ ZneX'a nSS^^ ^ Winter was estab-
de Punterennas. narcotics smuggling enterprise involving Frjgorificos

Pifl ^dZ^t^^^^^ Mario Calero, Jack Terrell, Tom
support ^o?tneConteT y ^ We&POnS ? lolation ™ connection with

iSS^^^SSSS 1 ^^?^ ^ F~nk Casti-o and
Florida trying canTpand ^

Witnesses 1

nioS ' A markeHng manager for *>» B ^ of Credit ar,d Commerce Inter-

^feSSott Bahamina poHtical operative,
jS&aSL ta -' DePUty a—* Native Af-

s;Florida grand j^i^SfyS^M^^^SL^'i Norie ^ b y two
* , Camper, Franklin' Joseph. A

r 1; and,conspiracy charges, now serving a sentenS S^A ^t f f mC0 ' wea P ons
ator of fte Recondo Mercenary SSf&W m DoIoS A^ er 0Wner 311(1 °P er "

- ; Carlton, Floyd. A federal prLone^lykted h?1987 ^ ' Maham ^
ly the personal pilot of General ^SStay^^S^^ SS 1 ^ former -

nthe federal grand jury leading to inaffi^taTSSi^ ^ t agmaSt Norie e a befcre

Sim.ttie Federal Witiiess Sction^ogSn? g& m J&nUaiy ' 198 8^urrently

|«552SS^^'^ " Charge ° f fce ^ ^vision of & e Drug

tf^non y in closed session

«Eaw -Enforcement and Foreiini Policv^A^l^n^ ■ e ^ tion of S, Hrg. 100-773, "Drugs,
t nons" at the conclusionof this list- ^ released are listed separately under "Deposi-

168

: Cesar Octaviano' A Nicaragua^ living in Costa Rica who served as a political offi-
cial of the ARDE contra organization bn the Southern Front; brother of Nicaraguan
Resistance director, Alfredo Cesar. ■ J,.. . ™ .j f„™„i, r

Chambrro, Adolfo Jose "Popo". A Nicaraguan living : in Miami, Florida; formerly
the^logitics chief and second in coinrnand of the ARDE tontra organization on the

S °Sone?WillSrn: A U.S. citizen living in Costa Rica; a farmer and -former business

^Fe^fMit Former Assistant U.S. Attorney for the Southern Districts
. Florida,' assigned to handle- prosecution of Miami ^Conti-a -Neutrality Act and weap-

^ScS'Luis. A Miami-based narcotics trafficker who became a federal informant

^r^oLral Paul (U.S.A.-Ret). Former Commander of tte Southern
Co^Zd based in Panama (1983-1985); consultant to the President's Commission

° n &^ R^d^FornSr Chief Assistanct U.S. Attorney (198J-1989), chief of
CrSl &d Narcotics Divisions (1982-1987), Southern District of Florida, Miami,

^Holwill Richard. Deputy Assistant Secretary of State for the Carxibbean.

HoodJ Louella. A resident of Bradentoh, Florida who hired John Hull to manage
farm property for her in Costa Rica. " ' -

. KeSnlr, Leon B. Former U.S. Attorney for the Southern District of Florida.
Lawn, John C. Administrator, the Drug Enforcement -Agency.- ; >- .
LoebTGerald. A former pilot for Eastern Airlines; currently Chairman of Legisla-
tive Affairs for the Airline Pilots' Association. -i \ i f J> U 'U'iT^is
/ Lota, Werner. A Costa Rican who became : the personal pilot for .Robert I Vesco
former Costa Rican President- Carazo and -Costa Ricait President Daniel Oduber;

of . T£ taxi service in Costa Rica; convicted in- the U.S. for conspiracy to
hnport drugs in 1985 and sentenced to four- years in prison; deported at the conclu-
sion of his sentence to Costa Rica. J , „ t^- • • t j.* n
Marum, Thomas E. Deputy Chief of Internal Security Division,. Justice Depart

m Mayer, Martin P. An authority on banking, and author of such books as "The
RcTilrAr^ and "The Fate'of the Dollar." ■ ,.

S^ John^ H A federal prisoner convicted in 1987 for running a c°ntmumg
criminal enterprise in connection with cocaine trafficking; sentenced to life without
parole plus 110 years; formerly a lawyer and county-judge

P McNeil, Ambassador Francis. Former U S. Ambassador to Costa , E ^J^80-198%
and former Deputy Assistant Secretary of State for Intelligence and Research (1984-

19 Morales, George. A federal prisoner convicted in 1986 for running a continuing
crmVinXnterprle in connection with cocaine trafficking; sentenced to 16 years.
• Moreenthau Robert." District Attorney for New York County.

KhV A^mtal Daniel P. (U.S.N. Ret). Former Chief of Staff to Vice President
Geor^ush; chief of the South Florida Drug

of the National ' Narcotics Border Interdiction System (all 19^-198oJ, currently
President of Murphy & Demory Ltd., a Washington,-©.*!, consulting firm.

palmar Michael B. Former Delta Airliner flight engineer and copilot; became a
narcotics trafficker inr-1977 with- the Carroll marijuana smugg^g rinK later became
^informant for the Drug"' Enforcement Agency; Vice Prudent of Vortex, tic a
company which' provided services to the Contras as a contractor of the Nicaraguan
Humanitarian Assistance Organization (NHAO). .. ,

Prado, Karol. A Nicaraguan living in Costa Rica who served as chief of communi-
cations^or ARDE under Eden Pastora. - . > . . „ "

QuSta^afosvaldo. President of Ocean-International Seafood of Miami Florida; a
fedeS witaess in the 1988 grand jury indictment of Haitian Colonel Jean-Claude

T Rehnian^Sz. A former employee of the Bank of Credit and Commerce Interna-

^Rkha^d^k^Smer Deputy Attorney General, Criminal Division, Justice De-

P ^d^iez,. Felix Ismael. A veteran of . the Bay, of Pigs and former officer of lie
oKS^M; assigned by Oliver^orfc m ^September ^1985 to main-
tain Contra resupply operations at Hopango Air Force base in El Salvador.

169

tegsss""* of Defense (i98i - i987) ~ySLtrthXs

Vo S 5l I ^rt^1i n i A ? 1 f a 5 Sad f r *? 016 United States Panama.

Writs and Subpoenas Issued Dueing Investigation

WRITS (13)

Antonio Aizparua
Gary Wayne Betzner
Frank Camper
Floyd Carlton
Werner Lotz
John McCann
Ramon MHian Rodriguez
George Morales
Leandro Sanchez Reisse
Leigh Ritch
Michael Vogel

Zavala/Cabezas Wiretap Documents

SUBPOENAS (23)
Antonio Aizparua ^ -

BCClttl^ 6 ^ Commerce International (4) [Awan, Shafi. BCCI Ltd.,
Gorman Bannister
Popo Adolfo Jose "Popo" Chamorro
Raoul Diaz
Jeffrey Feldman
Norman Faber.

First City Foreign Currency Corp.

General Paul Gorman

Greenberg Bros.

Marta Healey

John Hull . .

Intercontinental Detective Agency

"Miami Attorney"

Oliver North Notebooks

Michael Palmer

Felix Rodriguez

Nestor Sanchez

Sarkis Soghenalian

Vortex Corp.

CLOSED DEPOSITIONS AND HEARINGS

Joe Adams
"Miami Attorney"
Kenneth Bergquist
Richard Brennecke
"Wanda Doe"
Michael Harrington
Leon Kellner
Thomas Marum
Mark Richard
Leandro Sanchez-Reisse
Jack Terrell